PBR 0.1 yields 42 billion won in inheritance tax; PBR 0.8 yields 336 billion won
'Final bill should center on Lee So-young and Lee Hoon-gi proposals'
Lee Hoon-gi, a Democratic Party of Korea lawmaker representing Incheon's Namdong-eul district, on Thursday released an analysis comparing inheritance tax burdens under the Ministry of Economy and Finance's revised bill and his own proposed amendment to the Inheritance Tax and Gift Tax Act.
Lee said the analysis showed that the ministry's revised provisions on preventing share-price suppression would in fact hand enormous tax benefits to major shareholders who deliberately drive down their companies' stock prices. "The structure rewards major shareholders who destroy corporate value by suppressing share prices with bigger tax breaks, while hitting those who raise corporate value and push prices higher with a tax bomb," Lee said.
According to the analysis by Lee's office, the inheritance tax liability under the ministry's revised bill stands at just 42 billion won ($31.4 million) when a company's price-to-book ratio is 0.1. The figure doubles to 84 billion won at a PBR of 0.2, triples to 126 billion won at 0.3, rises fivefold to 210 billion won at 0.5, and climbs eightfold to 336 billion won at 0.8.
That means a major shareholder who artificially cuts the share price to one-eighth of its level — while leaving the company's net asset value unchanged — would also cut the inheritance tax bill to one-eighth. The more aggressively a shareholder suppresses the stock price, the greater the tax benefit.
Lee's own bill, by contrast, sets a valuation floor at 80 percent of net asset value, preventing any tax benefit from artificially depressed share prices. Under his proposal, as long as a company's net asset value remains the same, the inheritance tax liability stays fixed at 200 billion won regardless of whether the PBR ranges from 0.1 to 0.8.
"If the ministry's bill passes, major shareholders will pour every effort into pushing share prices lower rather than building corporate value, all to pocket tax breaks," Lee said. "This is a sham bill that claims to stop share-price suppression while actually rewarding unscrupulous major shareholders with tax benefits. The Ministry of Economy and Finance bill must be scrapped immediately."
Lee also warned that if the ministry promotes such a bill as an achievement of capital market reform, it will only deepen the disappointment and distrust of the 14 million individual investors who put their faith in government policy. "That is precisely why I have said I fear a repeat of the leveraged ETF crisis," he said, urging that the ministry's bill be abandoned and that a final legislative proposal centered on the bills by lawmakers Lee So-young and Lee Hoon-gi be passed at the current regular session of the National Assembly without delay.
bigroot@heraldcorp.com
