The Minute to Read (Weekend) series provides a quick overview of significant events in Korea from the week, conveniently condensed into a one-minute read. Here’s a recap of what happened this week: July 22-26.
S. Korea cuts top inheritance tax rate in significant reform
On July 25, the South Korean Ministry of Economy and Finance (MOEF) unveiled significant amendments to the inheritance tax law during the Tax System Development Review Committee meeting. Under the new provisions, the top inheritance tax rate will be reduced from 50% to 40% for estates exceeding 1 billion won, down from the previous threshold of 3 billion won. Additionally, the inheritance tax deduction for children will be substantially increased from 50 million won to 500 million won per child. The reform will also eliminate the 20% surcharge on the valuation of shares held by major shareholders. These tax code revisions mark the third tax reform initiative under the administration of President Yoon Suk-yeol. Following efforts to lower corporate tax rates and stabilize real estate taxes in its first year, the administration has now turned its focus to inheritance tax reform. The MOEF estimates that these changes will result in a tax revenue reduction of approximately 4.4 trillion won (around $3.17 billion).
S. Korea’s GDP declines 0.2% in Q2, first drop since 2022
The Bank of Korea (BOK) reported on July 25 a 0.2% decline in South Korea’s gross domestic product (GDP) for the second quarter of this year compared to the previous quarter. This marks the first negative GDP growth since the fourth quarter of 2022, when the economy contracted by 0.5%. The downturn in the second quarter’s GDP is primarily attributed to an unexpectedly robust performance in the first quarter, which saw a 1.3% increase, significantly outpacing market expectations of 0.6-0.7%.
Doosan merger plan sparks shareholder outcry, regulatory review
Controversy continues over the business restructuring efforts by Doosan Group, ranked 17th in the South Korean corporate sector. The conglomerate plans to merge its profitable subsidiary, Doosan Bobcat, which generates about 1 trillion won in annual profits, with the financially struggling Doosan Robotics. Shareholders of Doosan Bobcat have expressed dissatisfaction, claiming the proposed merger ratio is unfair. Amid these concerns, the Financial Supervisory Service (FSS) has requested Doosan Group to resubmit the merger documentation. Doosan Group stated that such requests for revised filings are a routine part of the merger process.
Financial woes hit TMON and WeMakePrice; payments to sellers halted
The financial troubles of South Korean e-commerce companies TMON and WeMakePrice (WMP) are escalating, as both have failed to make timely payments to sellers. Starting on the evening of July 23, TMON and WMP, which are the fourth and fifth largest e-commerce platforms in South Korea with a combined monthly user base of over 8.6 million, have suspended credit card payments and refunds. In response, banks have ceased loan services that advanced sales proceeds to these companies’ clients due to their inability to settle payments with sellers since the beginning of the month. The industry speculates that TMON, burdened with significant accumulated deficits, is experiencing a severe cash flow crisis. Consequently, sellers on TMON and WMP have not received their sales proceeds for over a month, with estimated losses potentially exceeding 100 billion won (approximately $72.17 million).
TMON and WeMakePrice crisis triggers sector stock decline
TMON and WeMakePrice (WMP), which process over 300 billion won in monthly transactions, have not been disbursing settlement funds to sellers, causing significant upheaval in the stock market. Travel agencies that sold airline tickets via TMON and have not received their settlements are seeing their stock prices plummet. Additionally, payment gateways (PGs) are facing declining stock prices due to potential future losses if consumers initiate chargebacks through credit card companies.
Microsoft Cloud outage to shift market dynamics, boost competitors
The recent global disruption of Microsoft (MS) cloud services is expected to cause a significant shift in the cloud market. Companies relying on MS cloud services for their IT infrastructure may now turn to competitors like Amazon Web Services (AWS) and Google Cloud.
On July 19, a faulty cybersecurity update on MS’s cloud service ‘Azure’ affected 8.5 million devices running the Windows operating system (OS). This led to widespread chaos across various sectors worldwide, including aviation, telecommunications, and healthcare services. Industry experts predict that AWS and Google Cloud will benefit from the MS cloud service disruption, with domestic (South Korean) companies also expected to strengthen their positions in the local public cloud market.
The incident has significantly damaged MS’s credibility with customers, potentially impacting both customer retention and the acquisition of new clients in the long run. Additionally, MS may face lawsuits for damages from affected customers, further disrupting its cloud business.
Actor Yoo Ah-in faces sexual assault charges amid drug trial
Actor Yoo Ah-in (38, Uhm Hong-sik) has been booked on charges of sexually assaulting a man, according to an announcement by the Seoul Yongsan Police Station on July 25. Yoo is accused of assaulting a 30-year-old man, identified as A, who was asleep in a studio flat in Yongsan-gu on July 14. Under current law, same-sex sexual assault is classified as imitative rape.
A had reportedly been sleeping in the studio from 6 a.m. to 4 p.m. on the day of the incident. Upon waking, he realized he had been sexually assaulted and filed a complaint with the police the following day.
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