Art and empire in flux as Samsung’s Lee family faces $12bn inheritance tax bill

Jean-Michel Basquiat drew motivation from black fighters, African sculpture and racial discrimination when he produced “Untitled (Black Figure)” in 1982, among the lots of work of arts in which he broke brand-new ground in art.

That exact same year, Lee Kun-hee guided Samsung’s leading engineers towards mastering how to move countless metal-oxide-semiconductor transistors on to a single computer system chip, a brand-new procedure that would assist underpin sweeping advances in contemporary innovation.

While the American painter and the Korean industrialist, who passed away in October 2020, were worlds apart, they have actually ended up being inextricably connected. Basquiat’s striking canvas is amongst the effects in a large estate Lee’s better half and 3 kids are thinking about parting methods with as they prepare strategies to foot an estate tax costs approximated at $12bn.

The costs, which originates from South Korea’s 60 percent estate tax, the greatest in the OECD, exposes the quickly broadening crack in between the nation’s ultra-rich and regular people.

“They have benefited from society to become so rich,” stated Chang Sung-ja, a 56-year-old in the southern city of Suncheon who, with her hubby, drives individuals house after they have actually been consuming. “People like us can’t even imagine the amount of their wealth.”

Lee, the boy of Samsung’s creator who led South Korea’s greatest business, was long revered as a helmsman whose successes assisted wrench an impoverished country from the ashes of a ruthless war and make it a technological powerhouse.

However for lots of South Koreans today, the Lees’ wealth — which of other chaebol households that control the county’s organization landscape and wield heavy political impact — has actually ended up being dissentious. The elites’ lives of benefit and excess stand in plain contrast to the ongoing fight of a lot of employees who have a hard time to make ends satisfy.

Samsung shareholder structure

In spite of the looming tax due date, neither the household nor Samsung has actually discussed how the tax will be paid — beyond firmly insisting independently that the cash owed will be represented completely and on time. The jailing in January of Lee Jae-yong, the late chair’s boy who now heads Samsung, on bribery charges connected to his own succession has actually even more made complex the household’s public relations issues.

The most likely circumstance is that the payments will spread out throughout 5 years under a complicated structure that will improve the household’s fortunes, according to experts and analysts.

Park Ju-geun, head of CEO Rating, a research study company, stated preliminary payments were anticipated to be made by means of big bank loans utilizing their shareholdings in Samsung systems as security.

Considered that the late patriarch’s wealth is primarily bound in a web of shareholdings in Samsung group business, various noted systems are likewise anticipated to pay greater dividends to assist support the household’s money position.

However towards completion of the five-year duration, the household will most likely still need to divest a few of its holdings in Samsung business, a possibility that raises the threat that its ironclad grip on the corporation might be loosened up.

Bar chart of Top 10 rates in OECD (%) showing Inheritance tax looms for wealthy Koreans

The sale or contribution of the art collection and restructuring of the household’s interests held by means of charity structures is likewise under conversation, according to Park and other individuals familiar with the scenario. The collection, approximated at 13,000 pieces and valued as high as $2.7bn, consists of works by Pablo Picasso, Andy Warhol and Mark Rothko, in addition to works by Korean artists Park Soo-keun and Lee Jung-seob.

Chung Joon-mo, head of the nation’s art appraisal centre and the previous leading manager at the National Museum of Modern and Contemporary Art, is encouraging of enabling tax breaks if the art work are contributed to state-run museums.

“They are already in talks with the museums and they have almost made the decision,” Chung stated, including that the contribution would be invited offered the “limit in buying expensive artworks with state budgets”.

Others, nevertheless, oppose the household utilizing art contributions to decrease their tax costs. “Why can’t they just pay the bill in cash? They have a lot of money,” stated Im Han-kyu, a 55-year-old cleaner. “This wouldn’t make a big difference to their livelihoods because money makes money.”

Estate tax routines differ around the world however South Korea’s leading rate is on the greater end of the scale globally.

The Lee household’s tax problems become part of a wider shift under method as succession and inheritance fights threaten to change markets throughout parts of Asia.

In Japan, for example, generational modifications in business ownership and control are driving a boom in personal equity interest that has actually drawn all the world’s greatest funds to start a business in Tokyo. 

Japan is not just the world’s fastest aging significant economy however likewise has the greatest concentration of business creators reaching their late 70s and searching for a structured exit from business they invested years structure.

The profile of business and their executives are important to this boom, which personal equity companies think will become reproduced throughout Asia as the various economies, such as South Korea, capture up with the demographics in Japan.

Back in Seoul, nevertheless, Samsung still delights in a strong fan base. Individuals, from magnate to monks, have in current days required Lee Jae-yong to be devoid of jail by means of a governmental pardon. The household hopes the present of works by artists such as Basquiat will advise the general public of its contributions to society and cement approval for a 3rd generation of Lee management.

Extra reporting by Emma Agyemang in Copenhagen

Jobber Wiki author Frank Long contributed to this report.