Membership courses shrink from 228 to 153

Visitor share falls to 30.9%

Heavy tax burden persists despite shrinking market

[Korea Leisure Industry Research Institute data]
[Korea Leisure Industry Research Institute data]

The number of membership golf courses and their share of total visitors have fallen sharply, yet the sector's annual tax burden still approaches 600 billion won, prompting calls to reform the heavy property tax surcharge applied to membership courses.

According to a report titled "The Current State of the Membership Golf Course Industry," recently released by the Korea Leisure Industry Research Institute, a private leisure-industry research and consulting firm, membership golf courses paid an estimated total of 597 billion won ($439 million) in taxes last year — comprising 230 billion won in property tax, 271.2 billion won in value-added tax and 95.8 billion won in corporate tax. That works out to about 3.1 billion won per 18-hole course.

Separately, individual consumption tax paid by membership golf course visitors came to an estimated 331.1 billion won last year. The institute said the tax differential between membership and public courses creates a green-fee gap of about 40,000 won per person, undermining the price competitiveness and profitability of membership courses.

The financial health of membership golf courses has improved markedly. Their debt ratio stood at 2,332 percent in 2012, inflated by membership deposits classified as liabilities because they must be repaid. It fell to 1,021 percent in 2014 and further to 189 percent last year. The institute attributed the improvement mainly to financially troubled courses converting to public status through corporate rehabilitation proceedings, as well as sustained operating profits in recent years that have allowed debt repayment.

A total of 114 courses have converted from membership to public status. Of those, 44 did so through corporate rehabilitation proceedings, while 56 chose to convert primarily because of the heavy tax burden.

The number of membership courses stood at 228 at the end of 2012, outnumbering public courses, which stood at 210. The count has since declined steadily, falling to 153 by the end of last year — just 27.3 percent of all golf courses nationwide. Membership course visitors also accounted for only 30.9 percent of total golf course traffic last year.

The institute said the tax regime for membership courses needs to be updated to reflect these market changes. Membership courses have historically faced higher tax rates than public courses in exchange for the ability to raise capital by selling memberships. But since the mid-2010s the membership market has contracted sharply, significantly eroding that fundraising advantage, the institute said.

The tax gap, however, remains wide. Under current local tax law, land and buildings used by membership golf courses are subject to a property tax rate of 4.0 percent — 10 to 20 times the 0.2 to 0.4 percent rate applied to land used by public courses.

"Membership golf courses have been subject to a heavy tax rate, but they had the benefit of recruiting members," said Seo Cheon-beom, director of the Korea Leisure Industry Research Institute. "We need to reconsider whether it is appropriate to impose a punitive property tax on membership courses whose membership recruitment benefit has been diluted since the mid-2010s. The government should gradually lower the punitive property tax rate on membership golf courses."


yjc@heraldcorp.com