A. Background of the Case
In this case, the Constitutional Court decided that the provisions of the Local Tax Act that prescribe simple progressive tax rates differentially applying acquisition tax rates in accordance with the values at the time of the acquisition of a house through a transaction for consideration (hereinafter referred to as "Tax Rate Provisions") and the provisions that require a tax office to apply the value of the acquired share as the tax base and the value of the entire house as the tax rate when the house acquired is common property (hereinafter referred to as the "Tax Imposition on Common Property Provisions") did not violate the Constitution.
The petitioners acquired shared portions of a house through a transaction for consideration, filed an acquisition tax return calculated based on the value of a portion of the house acquired as a tax base and the value of the whole house as the tax rate and paid the acquisition tax, and requested the heads of the relevant Gus to conduct reassessment, arguing that not only the tax base but also the tax rate should be calculated based on the value of the portion of the house acquired; however, the heads of the relevant Gus refused their requests.
The petitioners brought a lawsuit seeking the revocation of the refusal of their requests and filed a petition for judicial review of the Tax Rate Provisions and Tax Imposition on Common Property Provisions; however, the lawsuit was rejected, and the petition was dismissed. Thereupon, the petitioners filed this constitutional complaint.
B. Summary of the Decision
The Constitutional Court decided that the Tax Rate Provisions and the Tax Imposition on Common Property Provisions did not violate the Constitution, for the following reasons.
When considering that the purpose of the legislation of the Tax Rate Provisions is to promote the revitalization of housing transactions and housing stability by alleviating the tax burden on common people due to the acquisition of houses, because an acquisition tax is a tax imposed by placing emphasis on the acquisition of an object itself subject to tax, and it is possible to apply progressive tax rates in accordance with policy objectives, the Tax Rate Provisions help alleviate the tax burden on people who acquire relatively inexpensive houses, and it is inevitable that a relatively large deviation appears in the tax burden before and after the section where tax rates change because the Tax Rate Provisions adopt simple progressive tax rates. Therefore, the Tax Rate Provisions cannot be deemed to have violated the principle of equality of taxation.
Even in cases where a person acquired a shared portion of a house via a transaction for consideration, the application of progressive tax rates based on the value of the whole house at the time of the acquisition thereof is to realize fair taxation, and when considering that tax advantages granted to houses acquired via transactions for consideration is so-called "reduction in substitutes," which is applicable based on the value of the house subject to tax at the time of the acquisition thereof, it is difficult to consider that progressive tax rates violate the principle of equality of taxation because unfairness may occur among taxpayers where different tax rates are applied according to the number of persons who acquire a house subject to tax.
Meanwhile, where tax rates are applied based on the value of a portion of a house acquired, it is possible for a person liable to pay tax to try to evade the application of a high tax rate by trusting his or her title to a portion of the house to a third party even after he or she acquired the whole house, and the abovementioned application of tax rates may cause unfair taxation, substantially increasing the tax burden on taxpayers in good faith. Therefore, where a person acquires a shared portion of a house via a transaction for consideration, the Tax Rate Provisions which require the application of progressive tax rates based on the value of the whole house irrespective of the purpose of tax evasion do not violate the principle of equality of taxation.
C. Significance of the Decision
The Tax Rate Provisions and the Tax Imposition on Common Property Provisions contribute to the promotion of equality of taxation by preventing the evasion of acquisition tax by "dividing a house into portions" when purchasing an expensive house. It is significant that this decision has recognized that it is legitimate to set the rate of acquisition tax on the purchase of a house based on the value of the whole house as in the case where one person purchases a house, even in cases where a number of people purchase a house by dividing the house into portions.