Lee Kun-hee, who transformed South Korea’s Samsung into one of the world’s biggest technology groups, died last year. The family now has to find $12bn as payment for inheritance tax.
The bill, which stems from South Korea’s 60 percent inheritance tax, the highest in the OECD, exposes the rapidly widening fissure between the country’s ultra-rich and ordinary citizens.
Whilst $12bn is a big bill, the debate is whether it is fair or not? When the FT reported this issue, many readers posted comments. Why? Inheritance tax is very emotive. Some believe it is essential to ensure we have a system that stops the rich from getting richer. Others take the view that tax has been paid through an individual’s lifetime, so why tax accumulated wealth? Every argument has substance.
In the same way, wealthy individuals could move tax jurisdictions. Who doesn’t know stories about people changing tax jurisdictions to save tax?
I am reminded of the simple phrase. Except it or change it.
Why have some individuals moved to low tax jurisdictions? They are motivated to reduce the tax they pay. Others may accept and work within tax laws as Lee Kun-hee. It depends on perspective. If you feel very strongly about not paying inheritance tax, you will take steps to find opportunities to reduce or not pay it. But if you make the decisions with too much hot blood, it may not be the right decision for your beneficiaries. If you feel strongly about not paying tax, try to argue the opposite. It may not alter your decision, but it means you’ve added logic to how you feel. It may also give you a fresh perspective that has better outcomes.
There are many occasions where we have seen inheritance tax schemes embraced by individuals and we’ve asked the question, “Why did you do that? “What made you do it that way’? It’s when individuals have to think about the decision they made in the past but then struggle to give it clarity today. Why? Because how they felt at the time they made the decision is not as strong as it is today. It shows that before making big decisions, especially in the world of wealth transfer, estate planning, that good thinking, and balance are considered carefully. Especially when some inheritance tax schemes can’t be undone simply.
“In history, good intentions do not always make good consequences.” Alija Izetbegovic
And “Bad decisions with good intentions, are still bad decisions.” James C Collins