Researchers proposed applying the yeolbun-yeolseung averaging method to South Korea's capital gains tax for real estate at a parliamentary forum on the 20th. Lee Sang-min, senior researcher at Narasalrim Research Institute, presented the proposal at the 'Direction and Tasks for Real Estate Tax Reform' forum hosted by Democratic Party Representative Yeom Tae-young and Cho Kuk Innovation Party Representative Cha Gyu-geun at the National Assembly Members' Hall. The proposal aims to address progressive tax burden distortions that occur when long-accumulated income is realized at a single point in time, ahead of an anticipated government announcement on real estate policy measures including property holding tax increases.
Researchers Propose Yeolbun-Yeolseung Method for Capital Gains Tax
Lee Sang-min stated that the yeolbun-yeolseung method, currently used for retirement income taxation, can be applied to capital gains. The method divides total income by the number of years held (yeolbun), applies the tax rate to calculate tax for one year, then multiplies that tax by the number of years held (yeolseung) to determine total tax liability. Lee explained that introducing the yeolbun-yeolseung method "can adjust only the disadvantage under progressive tax rates that occurs when income formed over a long period concentrates at the time of transfer." He stated the method is more appropriate than uniform deduction rates for correcting tax burden distortions when income accumulated over long periods is realized at one point.
Jung Se-eun, professor of economics at Chungnam National University, assessed that "introducing the yeolbun-yeolseung system in the short term while reforming capital gains tax to focus on residence is sufficiently attractive."
Experts Recommend Holding Tax Increases with Rental Market Safeguards
Park Jin-baek, associate research fellow at Korea Research Institute for Human Settlements, stated that "holding tax increases lead to rental housing cost burdens" and recommended implementing policies for rental market stability alongside holding tax increases. Park advised caution regarding additional strengthening of capital gains tax surcharges, stating that transaction prices could rise through supply lock-in effects. He stated that "the structure of lowering transaction taxes and raising holding taxes should be established, and holding taxes should be operated in proportion to asset value."
FAQ
What did researchers propose at the National Assembly forum on the 20th?
Researchers proposed applying the yeolbun-yeolseung averaging method to South Korea's capital gains tax for real estate. Lee Sang-min from Narasalrim Research Institute presented this proposal at a forum titled 'Direction and Tasks for Real Estate Tax Reform' hosted by Democratic Party and Cho Kuk Innovation Party representatives at the National Assembly Members' Hall.
Why did experts recommend the yeolbun-yeolseung method for capital gains tax?
Experts stated the method addresses progressive tax burden distortions that occur when long-accumulated income is realized at one point. Lee Sang-min explained the method adjusts disadvantages under progressive tax rates by dividing total income by holding period, applying tax rates to one year's income, then multiplying by holding period to calculate total tax. Jung Se-eun from Chungnam National University called short-term adoption of the system "sufficiently attractive" when reforming capital gains tax to focus on residence.
