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Conglomerate heads may face 62.4 bln won in gift tax

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(Globalpost/GlobalPost)

SEOUL, July 4 (Yonhap) -- Owners of South Korean conglomerates may have to pay a combined 62.4 billion won (US$54.7 million) in gift taxes for granting contracts to affiliates owned by their family members, data showed Thursday.

Family-owned conglomerates, or chaebol, have been under fire for their practice of granting profitable contracts to their affiliates owned by their children or grandchildren in a bid to avoid paying gift taxes on future transfers of wealth.

Previously, laws did not regulate against the inheritance of such assets free of tax. But beginning this month, the revised tax law calls for levying such taxes on larger firms whose owners or their family members hold more than 3 percent in stakes in their affiliates.

The new law requires all South Korean conglomerates whose inter-affiliate trading surpassed 30 percent as of last year to be subject to taxation.

Under the revised standards, a total of 65 people from the top 30 chaebol groups would qualify for taxation, bringing the total of gift taxes to a combined 62.4 billion won, according to an estimate by CEOSCORE, a data provider on conglomerates and financial firms.

Hyundai Motor Vice Chairman Chung Eui-sun may have to pay the largest amount of gift tax with some 13 billion won, followed by Hyundai Motor Chairman Chung Mong-koo with around 10.9 billion won and Samsung Electronics Vice Chairman Lee Jae-yong with 8.8 billion won, according to CEOSCORE.

The data came as the National Tax Service (NTS) is ramping up efforts to establish fair tax administration in the corporate sector. The NTS has been seeking to toughen its crackdown on large-sized businesses that are employing ever-sophisticated tactics to avoid paying taxes.

Meanwhile, President Park Geun-hye has been pushing for an "economic democratization" campaign to curb conglomerates' abuse of power.

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http://www.globalpost.com/dispatch/news/yonhap-news-agency/130704/conglomerate-heads-may-face-624-bln-won-gift-tax