Facing $11B tax bill, Samsung heirs donate mass art trove
Seoul, South Korea — Samsung’s founding family will donate tens of thousands of rare artworks, including Picassos and Dalis, and give hundreds of millions of dollars to medical research to help them pay a massive inheritance tax following last year’s death of chairman Lee Kun-Hee.
The Lee family, including his wife and three children, expects to pay more than 12 trillion won ($10.8 billion) in taxes related to inheritance, which is more than half the wealth Lee held in stockholdings and real estate, Samsung said Wednesday. This would be the largest amount in South Korea and more than three times the country’s total estate tax revenue for last year. The family plans to divide the payment in six installments over five years, while making the first payment this month.
“It is our civic duty and responsibility to pay all taxes,” the Lee family said in a statement. They had until Friday to report the extent of the inheritance and payment plans to tax authorities.
Raising cash for the tax payment is crucial for the Lee family to extend its control over Samsung’s business empire, which extends from semiconductors, smartphones and TVs to construction, shipbuilding, and insurance. Some analysts say the process could result in a shakeup across the group.
The late Lee owned 4.18% of Samsung Electronics, which is one of the world’s biggest makers of computer memory chips and smartphones, but also held stakes in Samsung affiliates that collectively owned a larger share than his in the crown jewel electronics company. This was part of a complex shareholding structure that has allowed Lee and his family to exert broad control over the group.
In Wednesday’s news release, Samsung did not mention how Lee’s wife and children would split his assets between them, and there’s speculation they haven’t yet reached a final agreement.
Most market analysts believe that Lee’s shares will be distributed in a way that would strengthen the leadership of his only son and corporate heir, Lee Jae-yong, the de facto chief of Samsung Electronics who is currently serving a prison term over bribery and other crimes. Lee’s other children are Lee Boo-jin, CEO of Samsung’s Shilla luxury hotel chain, and Lee Seo-hyun, who heads the Samsung Welfare Foundation.
Giving away the late chairman’s vast collection of masterpieces could help smoothen the payment, because his family wouldn’t need to pay taxes on donated artworks.
The family plans to donate 23,000 pieces from Lee’s personal collection to two state-run museums. They include old Korean paintings, books and other cultural assets designated as national treasures, and modern Korean painters such as Park Soo-keun and Lee Jung-seop. There are also the works of Marc Chagall, Pablo Picasso, Paul Gauguin, Claude Monet, Joan Miro and Salvador Dali, Samsung said.
The Lee family will also donate 1 trillion won ($900 million) to help fund infectious disease research and treatment for children with cancer and rare illnesses.
About half of that money will be used to help finance the establishment of a new, 150-bed hospital providing specialized treatment for infectious diseases. Experts had raised the need for such facilities equipped with negative pressure rooms and other advanced systems following the emergence of COVID-19.
About 300 billion ($267 million) of the funds will go into a decadelong program with the Seoul National University Children’s Hospital to help families pay for the treatment of children with cancer and rare diseases and support clinical trials and drug development.
“Members of the (Lee family) hope to honor the life of the late Chairman Lee and his commitment to corporate citizenship and co-prosperity by giving back to communities,” Samsung said.
Before his death in October, Lee was credited for transforming Samsung Electronics from a small television maker into a global giant in semiconductors and consumer electronics. But his leadership was also marred by corruption convictions that highlighted the traditionally murky ties between the country’s family-owned conglomerates and politicians. He had been hospitalized for years following a heart attack in 2014.
Lee Jae-yong, who has since helmed the group in his capacity as vice chairman of Samsung Electronics, is currently serving a 2 1/2-year sentence for his involvement in a 2016 corruption scandal that spurred massive protests and ousted South Korea’s president.
The younger Lee has vowed to improve Samsung’s public image, declaring that heredity transfers at the group would end and that he wouldn’t pass the management rights he inherited to his children. He also said Samsung would stop suppressing employee attempts to organize unions, although labor activists have questioned his sincerity.
A growing number of politicians, religious and business leaders have been calling for President Moon Jae-in to pardon Lee. They say it would help Lee strengthen Samsung’s global leadership in semiconductors and he could possibly use his business reach to help the country secure more coronavirus vaccines.
Critics point out that Samsung didn’t show signs of trouble when Lee was in jail in 2017 and 2018, and that prison terms have never really stopped corporate leaders from relaying their management decisions from behind bars.
Health officials have denied thinly sourced local reports that Samsung has been providing behind-the-scenes help in their negotiations with global pharmaceutical companies over coronavirus vaccines.