"Need to Ease Gift Tax Regulations to Revitalize Corporate Public Interest Foundations"

Hankyung Association Analyzes Business Status of Large Corporate Public Interest Corporations
Average Annual Growth Rate of Corporate Social Contribution Expenditure 3%

The average annual growth rate of social contribution expenditures by public interest corporations affiliated with large corporations remained in the single digits. To revitalize this, it was pointed out that the stocks and dividends, which account for the majority of corporate profits and assets, need to be increased, and the related gift tax burden should be reduced to promote stock donations.

On the 5th, the Korea Economic Association analyzed the business status of public interest corporations belonging to publicly disclosed corporate groups in 2018 and 2022, revealing that the social contribution expenditure of these corporations in 2022 was 5.9026 trillion won, a 12.7% increase (an average annual growth rate of 3.0%) compared to 5.2383 trillion won in 2018. This is only about one-third of the 35.7% increase (an average annual growth rate of 7.9%) in social contribution expenditures by the top 500 companies by sales during the same period.

The Korea Economic Association analyzed that excessive regulations related to public interest corporations are hindering the activation of social contributions by large corporate public interest corporations. Specifically, they pointed out that ▲restrictions on voting rights of public interest corporations ▲inclusion of related persons of the same individual as executives of nonprofit corporations ▲inclusion of related persons of the same individual when nonprofit corporations or organizations appear ▲tax law regulations on stock contributions to public interest corporations are holding back progress.

The Korea Economic Association argued that dividends, which make up a large part of the income of public interest corporations affiliated with large corporations, need to be increased, and to do so, the gift tax on stock contributions should be eased. Since stocks and dividends play the most important role in social contribution activities, improving this and activating stock donations should lead overall social contribution activities.

In fact, the total income of public interest corporations affiliated with large corporate groups in 2022 was 7.1143 trillion won, an 18.9% increase compared to 5.9819 trillion won in 2018. Among this, the proportion of 'other income,' consisting of financial interest and dividends or real estate rental income, accounted for 85.1%, making up the majority.

The largest portion of the total assets of public interest corporations was also stocks and equity investments (43.1%). The growth rate of stock and equity shares was also high, increasing by 16.1% in 2022 compared to 2018, ranking second highest after land (33.0%). This is higher than the total asset growth rate (14.2%) during the same period.

Lee Sang-ho, head of the Economic and Industrial Headquarters at the Korea Economic Association, said, "Major large corporations are conducting social contribution activities in various fields through affiliated public interest corporations, but the average annual expenditure growth rate (3%) over the past four years is somewhat insufficient," adding, "To promote corporate social contribution activities, restrictions on voting rights of public interest corporations and the gift tax burden on stock contributions must be eased."