Prime Minister Chung Sye-kyun, left, and Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki enter a briefing room Monday to announce the government's anti-real estate speculation measures at the Seoul Government Complex. (Yonhap News)
The South Korean government announced a host of measures Monday aimed at eradicating real estate speculation.
The measure includes registering all public officials' assets, increasing the transfer income tax for land under short-term ownership, requiring the submission of funding procurement plans when acquiring land, and demanding the return of three to five times the aim of illicit earnings.
The measures read as a signal of strong commitment on the government's part. But some hurdles are anticipated before they can go into effect amid questions about the application of retroactive legislation and a number of legislative issues to resolve.
The government announced 20 individual measures in four categories: prevention, detection, punishment and confiscation.
As a prevention measure, it plans to increase the transfer income tax rate from 50% to 70% for land owned for less than one year and from 40% to 60% for land owned for less than two years. The government plans to amend enforcement decrees for the Income Tax Act and Corporate Tax Act to implement as of January 2022.
In the case of non-business purpose land, it plans to increase the extra transfer tax rate from 10 to 20 percentage points, while eliminating special deductions for long-term ownership (up to 30%).
Additional plans would require all public officials to register their assets. Government employees involved in real estate-related duties and public institution employees would be required to register assets with the Ministry of Personnel Management (MPM), while others would have to do with the organization they are affiliated with.
Some 230,000 public institution employees and Level 4 government employees and higher are currently registered with the MPM; that number is expected to rise to 300,000 going forward.
Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki said the requirement would "apply not just to the individuals themselves but also to direct ascendants and descendants."
"This year, we will be [focusing on] the real estate only, and we plan to [focus on] the financial information after the system has been set up," he added.
The government further plans to require the submission of a funding procurement plan for those acquiring land measuring 1,000 square meters or more in area or valued at 500 million won (US$440,833) or greater. The aim is to prevent transactions using the names of relatives.
In the area of household non-mortgage loans, it plans to establish loan-to-value regulations throughout the financial world while requiring banks and other financial institutions to notify a real estate transaction analysis organization – to be established in the future – when speculation is suspected in the case of a land-backed loan.
As a detection measure, the government included plans to quickly launch a real estate transaction analysis organization to monitor the real estate market on an ongoing basis. A 20- to 30-member "real estate transaction analysis planning team" is to be set up first in April, after which the Report of Real Estate Transactions Act is to be amended to establish the new organization.
The maximum reward for reporting real estate disruption activities is to be increased to 1 billion won (US$881,667) from its current 10 million won (US$8,816). In terms of punishment and confiscation measures, the plan includes stiffer criminal punishments for four categories of real estate market disruption activities: improper usage of undisclosed and inside information, market manipulation, false contract reporting, and illegal reselling and improper application activities.
Those judged to be involved in one of the four disruption activities would face penalties of up to five times the amount of illicit earnings and employment restrictions at related institutions. In cases involving illegal resale of lots, punishments would extend to intentional buyers, and application drawing opportunities would be taken away for 10 years.
Cases of farmland acquisition for speculation purposes would be handled in accordance with current Farmland Act regulations, with enforcement fines charged every year until the time of sale in cases of noncompliance.
"Government oversight of the land market has been lax in the past," said Jeong Jun-ho, a professor of real estate studies at Kangwon National University.
"The increased monitoring through the real estate transaction analysis organization in the cases of land-backed loans and the submission of funding procurement plans is late in coming, but it's necessary," he said.
Some observers raised questions about the feasibility of retroactive confiscation of illicit gains and detection of borrowed-name transactions despite the government's strong commitment.
"I'm not sure that it's legally possible to amend the current law to apply it to past misdeeds," said an employee in one economy-related government agency.
"They're talking about disclosing assets for all public officials, but it may be difficult to find [assets acquired] through acquaintances," the employee added.
In connection with this, Hong said, "Confiscation and collection are possible under current laws, including the Act on the Prevention of Corruption."
"We plan to amend the related laws and allow for the confiscation of illicit earnings to the extent that it does not conflict with the Constitution," he added.
"In the case of borrowed-name transactions, we plan to pursue concurrent investigations focusing on plots and land," he said.
By Lee Jeong-hun, staff reporter
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