The Changes in Tax Rates and Housing Gifts
Asian Tax Journal Vol. 24 No. 4 (2023), pp. 103-128
Abstract
As the real estate market has overheated since 2018, the government has significantly increased the comprehensive real estate holding tax rate, capital gains tax rate and the acquisition tax rate for housing gifts in consideration of tax policy aspects to block speculative demand. As the burden of comprehensive real estate holding tax, capital gains tax, and acquisition tax increased rapidly, some real estate owners chose gifts as a tax－saving strategy. Therefore, this study analyzes whether the number of housing gifts actually increased just before the tax rate of comprehensive real estate holding tax and capital gains tax centered on multiple homeowners and the acquisition tax rate increase for housing gift acquisition. According to the empirical analysis results of Hypothesis 1 of this study, in the negative binomial regression, all gifts increase significantly due to an increase in the comprehensive real estate holding tax rate for multiple homeowners, but in the results of the ordinary least squares, gifts do not increase significantly. On the other hand, due to a significant increase in the comprehensive real estate holding tax rate for multiple homeowners and the increase in the heavy tax rate on capital gains tax, gifts increase significantly in both the negative binomial regression and the ordinary least squares in the second and third months prior June 1, 2021. This is because when the comprehensive real estate holding tax Act was revised on December 31, 2018, the comprehensive real estate holding tax rate for multiple homeowners was relatively small, but when it was revised on August 18, 2020, the comprehensive real estate holding tax rate was greatly increased. And it is estimated that the heavy tax rate on capital gains tax for multiple homeowners was also increased, which had a significant impact on increasing the number of gift registrations. On the other hand, there was not a significant result a month prior to June 1, 2021 because the gifts were made in advance as the standard housing price is announced on April 30 annually. In addition, according to the ordinary least squares and negative binomial regression for Hypothesis 2, gifts also increase significantly in the first, second, and third months before August 1, 2020. It is seen that because the acquisition tax rate is revised from 3.5% to 12% for houses with a standard market price of KRW 300 million or more, which significantly increases the acquisition tax burden, gifts were made in advance. Furthermore, the impact of changes in major real estate tax rates on the number of gift registrations is further analyzed by dividing them into metropolitan and non－metropolitan areas. As a result, the number of gifts increases around the non－metropolitan area in the first and second months before June 1, 2019, and two months before June 1, 2021. This is because most of the declared prices of houses in the non－metropolitan areas are less than KRW 600 million, thus making it possible to gift a spouse without the burden of a gift tax. On the other hand, in the case of an increase in the acquisition tax rate for housing gifts, it appears qualitatively similar to the main analysis results. This study presents the results that multiple homeowners use gifts as a tax－saving strategy when the tax burden related to real estate increases. Therefore, it suggests that it is important to prepare the most appropriate plan for the purpose of legislation by predicting the reaction of taxpayers in advance when drafting a tax bill.
Keywords
- Gifts
- Comprehensive Real Estate Holding Tax
- Capital gains tax
- Acquisition tax
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