Rising Land Taxes Hit Businesses Hard

Companies under pressure of rising property tax-

Burdens from comprehensive real estate tax have increased for distributors and hotels, which own many real estate properties for business purposes.

Lotte Hotel Co., which operates Lotte Hotel, Lotte World, Lotte Duty Free Shop, and other businesses, has to pay about 19.3 billion won in comprehensive real estate tax this year, up 30 percent from last year. This amount is 60 percent of last year뭩 corporate tax bill of 32.099 billion won.

A Lotte Hotel official explained, 밚and prices rose nationwide this year, and more and more government-assessed land prices have been readjusted to realistic levels. The comprehensive real estate tax burden largely increased as a result.?

Shinsegae, which operates Shinsegae Department Store and E-Mart discount store, will have to pay 21.5 billion won in comprehensive real estate tax this year. It is expected that the holding tax, which combines comprehensive real estate taxes and secured property taxes, will amount to 29 billion won. The largest comprehensive real estate tax amount will be imposed this year on KT, which was subject to around 25 billion won. The reason is because KT owns a lot of real estate nationwide for head offices and branches. KT뭩 comprehensive real estate tax this year is about nine percent of the last year뭩 corporate tax bill of 395.9 billion won. SK Telecom뭩 bill for the same tax is estimated to be 3-3.5 billion won.

Business activities could be affected ?

The current comprehensive real estate tax law provides that corporations whose real estate, including lands associated with office and retail buildings and non-business land, exceed 4 billion won in government-assessed land prices are subject to a comprehensive real estate tax. The tax rate ranges from 0.6 to 1.6 percent on the basis of the aggregate value of the real estate.

This year뭩 basis for comprehensive real estate tax rose to 55 percent, up five percent from 50 percent last year. As the government has a plan to increase the tax basis to 100 percent by 2015, companies?comprehensive real estate tax amounts will continue to increase.

An executive from the finance division of a conglomerate showed displeasure, saying, 밃lthough the incumbent administration cut corporate tax rates by two percentage points in an attempt to promote investment, the increased comprehensive real estate tax burden has nullified the beneficial effect from the decreased corporate tax. We should be about to reimburse the majority of our profits by paying comprehensive real estate taxes.?

Lee Seung-cheol, a senior director of the Federation of Korean Industries, pointed out, 밫he government and the National Assembly are urgently required to make efforts to improve this situation, as companies are being hurt by the comprehensive real estate tax, which was aimed at preventing real estate speculation.?

With regard to Lee뭩 remarks, some Uri Party lawmakers recently filed a tax law reform bill that proposes easing the tax basis and the tax rate.

However, the Ministry of Finance and Economy (MFE), which has control of the tax, is skeptical.

An MFE official said, 밯e have no plan to reform related tax system this year, as it is the first year for the revised comprehensive real estate tax system to be implemented.

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