Controversy Mounting over Inheritance Tax on Samsung Group Founder Family

The inheritance tax that the Samsung Group founder family should pay after the death of the group chairman is estimated at 11 trillion won. With the scale of the tax causing controversy, it has been pointed out that the excessively punitive inheritance tax in South Korea is threatening the survival of Korean business groups.

The total value of the late chairman’s Samsung Group shares is estimated at 18.2 trillion won and the effective tax rate in this case is 58.2 percent. This rate is the highest in the OECD, followed by Japan’s 55 percent, the United States’ 39.9 percent, Germany’s 30 percent and the United Kingdom’s 20 percent. It is zero percent in Australia and Sweden, where inherited assets are not subject to any taxation until disposal.

The Korea Economic Research Institute said in its report on Nov. 5 that the inheritance tax rate should be lowered and the tax should be replaced with a capital gains tax, which is for taxation after subsequent disposal instead of inheritance. “South Korea’s maximum inheritance tax rate, 50 percent, is second only to Japan’s 55 percent in the OECD,” it said, adding, “Besides, the actual rate jumps to 60 percent due to the extra charge on the largest shareholder and this excessive burden results in the adverse effects including insecure management succession and weaker entrepreneurship.”

The institute also pointed out that the sum of the maximum income tax rate and the maximum inheritance tax rate amounts to 92 percent in South Korea, it is the second-highest in the OECD and the sum to which the extra charge is applied is 102 percent, the highest in the OECD.