[Editorial] Property tax balance

A tax rate can look small until one asks what it is measured against. On Tuesday, President Lee Jae Myung posted on social media a comparison of property holding taxes in Seoul, New York, London and Tokyo, noting that South Korea’s effective rate of about 0.15 percent is far below the level seen in other major cities.

The point needed little explanation. If speculation is the problem, higher holding taxes must be part of the remedy. Yet the arithmetic of fairness is rarely so simple. Any discussion of property taxation must account for the full structure of levies, the recent surge in assessed values and the credibility gap that opens when political rhetoric moves faster than policy design.

The headline figure of 0.15 percent, often cited as evidence that Korea undertaxes property, is derived by dividing total property tax revenue by the estimated value of real estate assets. Because property values in Korea are high relative to the tax collected, the effective rate appears unusually low.

Measured against gross domestic product, the picture differs. Holding taxes amount to roughly 1 percent of GDP, close to the average among members of the Organization for Economic Cooperation and Development. The contrast shows how a selective statistic can become a political talking point.

Cross-country comparisons are more complicated than a chart on social media might suggest. In New York, local governments rely heavily on property taxes, but acquisition and capital gains taxes are modest and assessments are often tied to purchase prices. Britain moved toward higher taxation on expensive homes recently, while Singapore operates under a system in which the state controls most land supply.

The differences lie not only in tax rates but in institutional structure. Adopting one element without adjusting the rest could end up producing a framework that is tougher on paper but no more effective in practice.

The imbalance becomes clearer once transaction taxes are included. In Korea, acquisition and capital gains taxes together account for a larger share of the economy than in most advanced countries. Estimates put total property-related transaction taxes at about 2.67 percent of GDP, more than double the OECD average. Heavy costs at the point of sale discourage transactions, encourage owners to hold assets and limit the number of homes available.

Increasing holding taxes without reducing the burden on buying and selling can deepen this lock-in effect, leaving prices sticky while activity slows.

Recent data adds difficulty. Officially assessed apartment prices in Seoul rose 18.67 percent this year, with gains close to 25 percent in high-priced districts south of the Han River. Because holding taxes are tied to these values, many homeowners will face higher bills even if rates stay unchanged. Under such conditions, further increases may look less like reform than escalation.

The politics surrounding the issue are equally sensitive. The Lee administration has portrayed ownership of multiple homes as a principal source of speculation and has pledged to exclude such owners from real estate policymaking. Yet asset disclosures released Thursday show that a share of senior officials still own more than one property, and that their average wealth far exceeds that of ordinary households.

Owning multiple homes is not always speculative. It may reflect inheritance, job relocation or family circumstances. Treating every case as being alike weakens the case for fairness and invites doubts about consistency.

Property taxation has often been described as a last resort, a measure to be used when other policies fall short. If that is true, it should be handled with care.

The comparison that began on social media may still help, but only if it leads to a broader calculation. Fairness in taxation cannot be judged by a single percentage. It depends on how the system fits together — and on whether the public believes the numbers make sense.