Rich Koreans Give Their Children Millions to Protect Against Property Taxes, Economy News & Top Stories
SINGAPORE (BLOOMBERG) – Some are barely old enough to walk and talk, let alone understand the stock market. But thanks to South Korea’s tax laws, a growing number of children as young as one year old are sitting on stakes collectively worth millions of dollars.
These wealthy children appear more and more on shareholder records as the aging tycoons who fueled post-war Korea’s industrialization shift their stakes to descendants to avoid inheritance taxes of up to 50 percent, the second highest rate among OECD countries. By offering shares now instead of passing them on to death, wealthy Korean families can legally lower their tax bill.
While similar tax reduction strategies are common around the world, stocks offered in other countries are often managed through trusts until children reach adulthood. In Korea, where trusts offer few tax advantages and where some tycoons are reluctant to rely on trustees from outside the family, the preference is to donate shares directly.
The result is a more transparent view of how the country’s business elite pass on their wealth to younger generations. In the 59 Korean business groups with assets exceeding 5,000 billion won (S $ 5.88 billion), at least 19 children under the age of 18 are listed as owners of shares, according to company records. compiled by Bloomberg. Their combined value: approximately US $ 29 million (S $ 39.4 million).
The largest stake, worth around $ 20 million, is owned by a great-grandson of 15-year-old Huh Man-jung, the founder of the conglomerate GS Holdings Corp. Based clothing manufacturer, four children between one and five years of age have combined holdings of approximately US $ 1.3 million. Gifts to miners in Korea exceeded 1,000 billion won for the first time in 2017, up 56% from 2013, a ruling party lawmaker said in September, citing data he received from the National Tax Service.
Some have used this information to argue that Korea is not doing enough to tackle income inequality. “It robs other young people of hope,” said Park Ju-gun, president of corporate research firm CEOScore. âNo matter how hard they try, they can’t beat children born rich. “
Yet there are few signs that the government is in the mood to suppress dynastic wealth. A proposal to revise the tax code this year will reduce, if passed, the rate of an additional inheritance tax on majority shareholdings of companies.