Nexon case reignites controversy over high level of inheritance tax

The Korea Times

The Korea Times

Finance

Sun, October 1, 2023 | 00:09

Economy

Nexon case reignites controversy over high level of inheritance tax

Posted : 2023-06-01 16:16

Updated : 2023-06-02 16:58

The logo of gaming giant Nexon is seen outside its building in Seongnam's Bundang District, Gyeonggi Province in this 2016 file photo. Korea Times file

By Yi Whan-woo

A dispute over high inheritance tax resurfaced this week, after the surviving family members of Kim Jung-ju, the deceased head of gaming giant Nexon, paid their inheritance tax in the form of stocks.

The controversy centers on the emergence of the government as the second-largest shareholder of Nexon, out of nowhere, by receiving inheritance tax under the current tax code that stipulates up to a 50 percent tax rate on inherited assets worth 3 billion won or higher.

The rate is the second highest among member countries of the Organization for Economic Cooperation and Development (OECD).

Announced by Nexon in a filing, Wednesday, inheritance tax was paid by Kim's wife, Yoo Jung-hyun, and their two daughters to the Ministry of Economy and Finance.

Nexon's late founder Kim Jung-ju / Korea Times file

The family members opted to pay a 29.3 percent stake, or 852,000 shares, in the holding company NXC Corp. in order to receive 10 trillion won worth of assets, including some 2 million shares, after Kim's death in February 2022.

Under the plan, they have been responsible for paying 6.5 trillion won in inheritance tax.

The NXC Corp. shares, now owned by the finance ministry, are worth 4.7 trillion won making it Nexon's second-largest stakeholder.

NXC said the change in the stake is unlikely to affect the company's management, noting that Yoo and her children hold a combined stake of 69.34 percent, down from 98.64 percent, in NXC to remain as Nexon's largest stakeholder.

It also said Yoo is participating in major decisions after being appointed as an inside director of NXC at its shareholders' meeting in March.

"Nevertheless, the fact that the government has no concerns regarding becoming the second-largest stakeholder of a gaming giant is certainly problematic," the CEO of a small- and medium-sized enterprise (SME) said on condition of anonymity.

The CEO in his 40s said he is taking over the business from his father as a second-generation family business owner and that the inheritance tax law makes it tough "to raise profits while being a responsible taxpayer."

"I am on the same page with most of the people that think that wealth should be transferred in a fair and objective manner to make the society better, but even so, the current tax code is too burdensome for family businesses to go on," he added.

The controversy over inheritance tax emerged in recent years, including in 2021 when inheritance tax to be paid by family members of late Samsung Group chairman Lee Kun-hee was found to be more than 12 trillion won.

The family members have been paying the tax in divided amounts since then, by selling stocks and taking loans.

yistory@koreatimes.co.kr