Filling the Cultural Void Since 1991
1991 marked a turning point in South Korea's cultural infrastructure with the enactment of the Museum and Art Gallery Promotion Act. At that time, the first Minister of Culture, Lee O-young (1934–2022), proposed establishing 1,000 museums and galleries across the country within a decade. This vision inspired numerous private collectors, local leaders, and small business owners to build museums and galleries, effectively shouldering the cultural infrastructure that the state was expected to finance.Now, over 30 years later, the achievements are significant. According to the 2023 Private Museum Report by Larry's List, in collaboration with the University of Amsterdam's sociology department, South Korea ranks third globally in the number of privately established contemporary art museums, following Germany (60) and the United States (59), with 50 such institutions. In terms of cities, Seoul leads the world with 17 private art museums, surpassing Berlin (14), Beijing (11), and New York (10).
Considering that 82% of private contemporary art museums worldwide were established after 2000, South Korea's private cultural infrastructure has achieved remarkable growth in a relatively short time. This goes beyond mere statistics; it demonstrates that Lee's vision was predicated on individual dedication rather than budgetary allocations, and this premise has effectively operated over the past three decades.
K-Culture's Rise Supported by Private Museums
Behind the dazzling emergence of K-Culture lies the dedication of private museums that have collected and preserved cultural heritage over decades, often at their own expense. The government has also encouraged these institutions to register formally under the Museum and Art Gallery Promotion Act and has consistently demanded they fulfill public functions.While the National Museum of Korea and the National Museum of Modern and Contemporary Art attract large annual visitor numbers, private museums collectively draw over 27 million visitors, exceeding the combined total of 24 million for the National Museum and the National Museum of Modern and Contemporary Art. Approximately 4,000 people are employed in private museums, contributing significantly to job creation. The number of collections in private museums rivals that of the National Museum of Korea, with a much greater variety. Importantly, these institutions have maintained principles of public service and non-profit status, fulfilling roles in cultural welfare and education outside of formal schooling.
Government Support and Challenges for Private Museums
The government has provided various forms of support to private museums. The Ministry of Culture offers monthly subsidies of 1.6 million won for up to two curatorial and educational staff members, with museums contributing 400,000 won monthly. In 2020, a total of 54.69 billion won was allocated to support 287 personnel. Last year, 11 billion won was invested in museum promotion, an increase of 2.8 billion won from 2019. However, this amounts to only about 30 million won per museum annually, insufficient to cover even one to three months of facility management costs.It is crucial to note that these private cultural infrastructures are not merely the domain of conglomerates or large corporate foundations. While large museums established by corporations exist, most private museums are built by individual collectors, local artists, retired educators, and small business owners who have invested their life savings into creating small exhibition spaces. Many private museum founders have sold real estate in prime areas of Seoul to fund their museums in rural areas. For them, establishing a museum is not a means of wealth accumulation but a commitment to return their lifelong artistic passion and collections to the public.
The founders of these museums often exhibit a lesser degree of ownership over their collections, reflecting a strong public consciousness. The challenges they face in becoming incorporated are not due to a desire to withhold their assets from society but stem from the financial burden of endowing the required assets for incorporation after having already invested in establishing and operating the museum. Cultural foundations aimed at exhibitions or performances have slightly lower requirements than scholarship foundations, but practically, they require endowments of 300 million to 700 million won to establish.
While it is theoretically possible to endow the museum's building, land, and collection, the requirement to also endow a certain amount of cash or liquid assets poses a significant barrier to establishing a foundation. Additionally, transitioning to a public interest corporation entails administrative and legal burdens that small private museums find difficult to manage, effectively limiting this option to larger institutions with capital and administrative resources.
Inheritance Tax Threatens Museum Sustainability
The reluctance of private museum founders to incorporate stems not only from tax benefits but also from fears of losing control over their collections and facilities. Regulations limiting the number of board members to one-fifth of the total from the founder and their relatives conflict with the realities of small private museums. This restriction can lead to founders being outnumbered on the board, risking their influence and even the operational rights of their heirs. There have been instances where founding families were excluded from the board, further discouraging incorporation.The unique characteristics of private museums necessitate the establishment of separate governance standards. Moreover, the societal perception that equates these institutions with mere leisure activities for the wealthy must be corrected.
Cultural Accessibility Lags Behind Growing Demand
Despite the dedication of private museums, cultural accessibility in South Korea remains low on an international scale. A report from the Korea Research Institute for Human Settlements compared cultural accessibility in Seoul and Berlin using the Enhanced Two-Step Floating Catchment Area method. The results were stark: the median accessibility for libraries was 0.168 in Seoul compared to 0.216 in Berlin, while museum and gallery accessibility was 0.121 in Seoul versus 0.205 in Berlin, indicating a significant gap. For performance venues, Seoul scored 0.000, indicating almost no accessibility, while Berlin scored 0.088. The only area where Seoul excelled was in commercial cinemas (Seoul 0.078, Berlin 0.015).The regional imbalance is even more alarming. The Gini coefficient for performance venue accessibility in Seoul is 0.969, and for museums and galleries, it is 0.827, highlighting the extreme concentration of cultural facilities in the capital. This contradiction, where the number of private museums approaches a global standard yet citizens struggle to access these facilities, underscores the value of each existing private cultural institution.
Inheritance Tax Undermines Museum Promotion Law
The grim reality behind the apparent prosperity of private museums is stark. After responding to government encouragement to open museums and protect artifacts for a lifetime, founders face a 'tax bomb' and the threat of closure when attempting to pass the museum to their children. While the government imposes regulations and obligations on these institutions as public assets, it treats them as private property under tax law, applying the full weight of taxation.Under the 1991 Inheritance Tax Act, private museums registered under the Museum Promotion Act were exempt from inheritance tax on real estate and collections. However, the 1996 revision of the Inheritance Tax and Gift Tax Act limited this exemption to museums operated by public interest corporations. Many private museum operators still believe they are exempt from inheritance tax on their buildings, land, and collections, due to assurances from the government, particularly from then-Minister Lee O-young. However, the tax reform was implemented unilaterally without sufficient consultation with private museums. Despite this, the museum community continues to trust the government's initial promises.
Currently, the law stipulates that private museums established or inherited by individuals are not exempt from inheritance tax on buildings, land, or collections. The law's language clearly indicates that only museums operated by public interest corporations qualify for tax exemptions. This legal reality means that even if a private museum has been registered and has diligently exhibited and preserved culturally significant collections, it is treated as a mere storage facility for private property under tax law.
As a result, the collections of many private museums are subject to heavy inheritance tax rates, reaching up to 50%, as their values are combined with other personal assets. The only legal way to avoid this tax bomb and maintain the museum's existence is for heirs to endow the entire museum's assets to establish a public interest corporation within the inheritance tax reporting period. Only after this transition can they claim the benefits of tax deferral under the Inheritance Tax Act and potentially seek exemptions for real estate used for public purposes.
Asymmetry Between Collections and Real Estate
Even if a private museum successfully transitions to a public interest corporation to meet the inheritance tax deferral requirements, it cannot fully escape the burden of inheritance tax. The Inheritance Tax Act only applies to movable assets, while the buildings and land housing these collections fall outside its scope. To exempt real estate from inheritance tax, a separate procedure must be followed to endow the ownership of the museum's building and land to the public interest corporation. This creates a paradox where artifacts may be preserved while the buildings housing them are not, leading to the issue of 'homeless collections.' Deferral merely postpones tax payment, while endowment relinquishes ownership, creating an imbalance.Thus, even private museums that have successfully transitioned to public interest corporations find themselves in a dual disadvantage. First, if they are not public interest corporations, they receive no tax benefits for either collections or buildings. Second, even if they become public interest corporations, the benefits differ between collections and real estate. While real estate endowed to a public interest corporation is exempt from inheritance tax, collections owned by heirs can only receive tax deferral if they are displayed in the museum.
To receive tax deferral, heirs must provide collateral equivalent to the deferred tax amount, and while certain cultural heritage items are exempt from collateral requirements, museum collections do not enjoy such exceptions. Consequently, private museum founders must provide collateral in the form of real estate, stocks, or financial guarantees, highlighting the flaws in this system.
However, if the ownership of the collections is transferred to a public interest corporation, complete exemption from inheritance tax is possible. The disparate treatment of collections and real estate reflects a gap in the tax law that fails to adequately support museums, placing the burden on founders and their heirs.
The government has introduced the 'Family Business Inheritance Deduction' system to support the sustainability of small businesses. This aims to prevent the discontinuation of family businesses by reducing inheritance tax by hundreds of millions of won. However, in the 30 years since its introduction, the operation of 'libraries, museums, and art galleries' has never been included in the list of eligible sectors for tax deductions. The noble act of preserving national cultural heritage has been treated the same as general service industries or real estate leasing under tax law.
In the past, the National Tax Service has firmly rejected tax deductions for private museum collections, arguing they are not business assets directly used in the family business. The government has imposed a uniform requirement that private museums transition to public interest corporations to receive tax deferrals, disregarding the diverse ecosystem of private museums.
Government's Role in Cultural Preservation
The government has a responsibility to preserve, research, and exhibit cultural heritage. However, ordinary individuals, not conglomerates, have shouldered this responsibility for over 30 years, resulting in South Korea ranking among the top countries in the number of private museums. Yet, citizens' access to culture remains below that of advanced cities, and the infrastructure to meet growing cultural demand is still lacking. In this urgent situation, allowing existing private assets to be scattered due to a single tax provision is a clear dereliction of duty by the state.If the government has offloaded responsibility under the guise of 'registration,' it must also provide corresponding compensation under the banner of 'protection.' If the government does not expedite the implementation of reasonable systems that allow for tax deferrals or exemptions in exchange for maintaining cultural facilities, the private cultural foundation built over generations will quietly disintegrate.
The conclusion is clear: tax deferrals for inheritance tax and benefits for donations hinge on whether the museum is incorporated and, more specifically, whether it has received individual designation from the Ministry of Economy and Finance. This structure implies that the government is essentially telling individuals not to register their museums unless they are willing to relinquish their assets through incorporation.
The current system imposes heavy public responsibilities on registered private museums while offering no tax protections. This imbalance must be addressed to ensure the sustainability of private museums and the cultural heritage they preserve.
* This article has been translated by AI.
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