South Korea ranks 2nd among OECD countries for property tax to GDP ratio


South Korea ranked second among the members of the Organization for Economic Co-operation and Development (OECD) for the ratio of property tax to gross domestic product (GDP) in 2020, with its growth of a year over year showing number one and ranking in terms of ratio climbing four notches from the previous year.

According to a recent analysis from the Paris-based organization, South Korea recorded 3.97 percent in the property tax ratio – in which the capital gains tax on home exchanges and of land occupies a dominant part – to the GDP from 2020.

Canada tops the list with a figure of 4.15 percent, followed by South Korea and France, which are tied for second.

Of the 38 members, the figure for Australia has not been included.

The OECD clarified that property tax includes “taxes on real estate or net wealth, taxes on the change in ownership of property by inheritance or gift and taxes on financial and capital transactions” .

Although South Korea remained in sixth place with 3.11% in 2019, the country saw its ratio increase by 0.86 percentage point in just one year, which was the highest growth in the OECD .

In addition, the property tax-to-GDP ratio has increased the fastest in terms of growth in three years since 2017, when it was 2.96%, ranking ninth. The ranking moved to seventh place with 3.09% in 2018.

During the period 2017-2020, South Korea overtook Greece, Israel, Belgium, Luxembourg, the United Kingdom and the United States.

South Korea posted an increase of 1.01 percentage point – the highest among members – over the three-year period. Some countries, including the United States, United Kingdom, Italy, Spain, Sweden, Mexico and Turkey, have seen this ratio decline.

Although Japan also recorded an increase in the corresponding period, its ratio only increased by 0.1 percentage point to reach 2.63% in 2020.

While the organization has yet to release the 2020 average for its 38 members, the average was 1.87% in 2017, 1.81% in 2018, and 1.8% in 2019.

In this trend, South Korea may become the country with the highest household burden on property taxes in the OECD, overtaking Canada in the upcoming analysis for 2021 or 2022.

Under the Moon Jae-in administration since May 2017, South Korea has focused a lot on the comprehensive property tax as part of its efforts to apply active taxation to multiple home owners and landowners.

Additionally, a large portion of homeowners in Seoul and some major cities have faced higher property taxes as a result of record house price growth over the past four years.

THE KOREA HERALD / ASIA INFORMATION NETWORK


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