Shinsegae Faces Trillion-Won Tax

The Shinsegae Group announced that the group’s owner will inherit his property through a proper legal process and pay astronomic amount of inheritance tax and gift tax, according to this law.

The tax the group’s owner has to pay is estimated to be as much as 1.0 trillion won.

This announcement is expected to make considerable effect on other conglomerates in Korea.

Koo Hak-seo, president of Shinsegae, and Chung Yong-jin, vice president, said last Friday at a press conference held after the opening ceremony of E-mart Sanlin branch in Shanghai, “While some group’s attempts to illegally inherit property without paying proper taxes are triggering controversies nowadays, the Shinsegae Group is preparing itself to pay the entire amount of tax. We hope that it will enhance the morality in business circles.”

In regard to the ballpark figure on the tax Koo has to pay, Koo said, “The aggregate market value of Shinsegae is estimated to be more than 8.0 trillion won now, of which 2.0 trillion won belongs to heave stockholders. Therefore, I have to pay approximately 1.0 trillion won” (The tax rate is 50 percent).

He also said, “Two thirds of it will go to vice president Chung as a form of gift, and a third of it will be inherited,” adding, “I am very ready to do it and therefore it might take place this fall. The tax can be paid either as stock or in kind.”

The heaviest stockholder of this group is Lee Myeong-hee, the last daughter of the late Samsung Group chairman and founder Lee Byung-chul and mother of vice president Chung, with 15.3 percent, followed by Chung Jae-eun, honorary chairman and father of vice president Chung with 7.8 percent. Vice president Chung is the third heaviest stockholder with 4.9 percent.

When Lee and honorary chairman Chung pass down their stocks to vice president Chung, Chung will have from 16 to 17 percent of stock even after selling some of them to pay the tax.

In regard to this, Koo said, “Even though we will lose some portion of our share because they will be sold to pay the tax, there is no problem in protecting our managerial position.” Most people, however, predict that Chung will purchase the stock again later.

Regarding this announcement, business experts viewed that this is Shinsegae’s preemptive action to gain the upper hand ahead of a legal fight against the People’s Solidarity for Participatory Democracy, who filed a suit to charge Shinsegae with attempting an illegal inheritance of the property before.

Jae-Seong Hwang jsonhng@donga.com