The heirs of the late Samsung Group chief Lee Kun-hee on Friday paid 2 trillion won ($1.79 billion) toward their 12 trillion won-plus inheritance tax bill. The remaining amount, which exceeds the 10.6 trillion won collected in inheritance taxes throughout the country from 2017 to 2019, will be paid in installments over the next five years.

Lee, who died in October, left an estate that was estimated to be worth more than 26 trillion won, including about 19 trillion won in stocks in key companies affiliated with the country’s largest conglomerate. He is survived by his wife, two daughters and son Jae-yong.

The bequeathed stocks, for which the heirs will have to pay around 11 trillion won in inheritance tax, were distributed in such a way as to help Lee Jae-yong, vice chairman of Samsung Electronics, strengthen his managerial control over the conglomerate. He controls the business group through a cobweb-like ownership structure linking Samsung C&T, Samsung Life Insurance and Samsung Electronics.

The Samsung Electronics vice chairman is the largest shareholder of Samsung C&T, the group’s de facto holding company, which holds a 19.3 percent stake in Samsung Life Insurance. The insurer, in turn, is the largest shareholder of Samsung Electronics, the world’s top memory chip producer and No. 2 player in the foundry sector.

He raised his stake in Samsung Life Insurance to 10.44 percent from a meager 0.06 percent by inheriting half of his late father’s stocks in the company. The stocks in the other affiliates were divided up among the family in accordance with the default practice under Korea’s inheritance law.

It will be tough for them to fund the inheritance taxes in order to keep their stakes in the conglomerate’s main firms.

They may well rely on stock dividends, particularly from Samsung Electronics, which plans to pay 9.8 trillion won in dividends annually until 2023. Given their share ratios, however, the annual dividends they will receive from Samsung Electronics and other affiliates of the group are estimated to be about 700 billion won, just a third of what they will have to pay annually over the coming five years.

The heirs may take out bank loans by using their stocks as collateral. But it is not certain that such loans plus their personal assets will be sufficient to cover the rest of the inheritance taxes. Selling off part of their stocks is hardly an option, as it would risk weakening the Lee family’s control over the group.

Their case rekindles the question of whether the nation’s inheritance tax system is appropriate.

Korea’s maximum inheritance tax rate has stood at 50 percent since 1999, when it rose from 45 percent. The rate goes up to 60 percent for stocks left by the largest shareholder of a company.

The upper limit for inheritance tax rates remains at 26 percent on average for member states of the Organization for Economic Cooperation and Development. It is fixed at 55 percent in Japan, 40 percent in the US and 30 percent in Germany. There is no inheritance tax in 13 OECD member states.

Korea’s maximum inheritance tax rate is higher than its maximum income tax rate, 45 percent. All other major countries, except for Japan, apply lower tax rates on bequeathed fortunes than on incomes.

Inheritance tax credits are offered to local companies that post less than 300 billion won in annual sales. Still, they carry various follow-through obligations that heirs must comply with for 10 years despite changes in managerial conditions.

The heavy inheritance tax burden has pushed many business owners and major shareholders to put their companies up for sale or move them abroad. If nothing is done to ease it, the country will see an increased corporate exodus and a reduction in employment.

The country’s inheritance tax system is based mainly on the negative perception of interfamilial business succession as a way to hand over wealth. Amid the controversy over the huge tax burden to be shouldered by the heirs of the late Samsung Group head, government officials say they are not considering lowering inheritance tax rates.

But the punitive inheritance tax system now needs to be overhauled to help ensure the stable succession of corporate management and encourage an entrepreneurial spirit. Hopefully, this will help protect jobs and strengthen national competitiveness.