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| The late Samsung Group Chairman Lee Kun-hee visits the 2010 Consumer Electronics Show in Las Vegas with his family. Courtesy of Samsung Group |
By Baek Byung-yeul
Samsung Group's ownership structure looks to be less affected by the over 12 trillion won in inheritance tax on the late Chairman Lee Kun-hee's fortune as his heirs are seeking to take out bank loans to pay the due taxes.
Samsung said the heirs of the late chairman will pay over 12 trillion won ($10.8 billion) in inheritance taxes. The tax amount, which is one of the largest ever imposed worldwide, will be paid in six installments over the next five years, the heirs added.
Attention has been drawn to how the heirs can prepare for such a large amount of tax, but industry officials said Thursday that some of the over 12 trillion won inheritance tax will be financed by credit loans ― an unsecured loan ― from local banks.
Two local banks are set to provide the loans worth hundreds of billions of won to the heirs. One of the two banks held a credit review meeting in which it decided to approve the loan.
"The heirs have applied for bank loans to pay the inheritance taxes. This can be interpreted as that they are trying not to stir up issues related with the group's governance," an industry official said on condition of anonymity, Thursday.
Industry officials viewed that most of the late chairman's shares in Samsung Electronics will be given to his son, Samsung Electronics Vice Chairman Lee Jae-yong. The current Samsung leader has wielded control over Samsung Electronics as he holds a 17.48 percent stake in Samsung C&T, which itself holds a 19.34 percent stake in Samsung Life Insurance, which owns an 8.51 percent stake in the electronics giant.
Industry analysts also said the Lee family will manage to pay the massive amount of inheritance taxes by combining their stock dividends with bank loans.
Kim Dong-yang, a researcher at NH Investment & Securities, said "Samsung is expected to expand dividends from Samsung Electronics and Samsung C&T to finance inheritance tax for the owner family."
After the inheritance tax announcement, reports shed light on Korea's extremely high inheritance tax rate. Upon announcing the tax payment plan, calls in particular are growing for the government to pardon the imprisoned Samsung leader Lee Jae-yong, they added.
Earlier this week, several major lobby groups in Korea submitted a petition for the pardon of Lee to the presidential office. In response, an official from the presidential office said, "We have not considered a pardon for him so far and also have no plans, for now, to do so." Lee was sentenced to two and a half years in prison by the Seoul High Court in January, in a bribery case involving impeached President Park Geun-hye.
"South Korea has stringent inheritance tax laws and high rates, resulting in a hefty bill for the family, including Samsung Electronics vice chairman Lee Jae-yong, who is currently in jail for bribery, embezzlement and other offences," AFP said.
The New York Times reported, "In January, the son, who is vice chairman of Samsung, was imprisoned after being sentenced to two and half years for bribery. In recent weeks, business lobbying groups have appealed to the government to pardon Lee Jae-yong so that he could lead Samsung amid growing uncertainty in the semiconductor industry."
When announcing how to pay the inheritance tax on Wednesday, the bereaved family also revealed they will donate 1 trillion won to support the ongoing fight against COVID-19 and research in the area of rare childhood diseases, as well as the late chairman's vast art collection, estimated to be worth more than 2 trillion won.
In line with the donation of Lee's assets, Busan's Haeundae District also announced the heirs donated the late chairman's land asset in the district. The district office said, "the heirs donated the forest land with an area of around 38,000 square meters on April 22."
"The bereaved family of Chairman Lee decided to donate to help preserve the forest after learning that our district is making efforts to designate the area as a district-run park," the district office said, adding that the late chairman purchased the forest land in 1992. The land asset is currently estimated at around 700 million won.
Calls are also growing for the country to revise the current inheritance tax rate, which is among the highest for member countries of the Organization for Economic Cooperation and Development (OECD).
"Inheritance tax should be lowered or converted to capital gains because not only the reduction of inherited property but also the succession of management rights of companies will face uncertainty," Korean Economy and Global Competitiveness said.
