(Bloomberg) — South Korea’s top policymaker said the country should pay citizens a “share” through taxes on AI profits, underscoring growing pressure to redistribute benefits from industry-rich chipmakers such as Samsung Electronics Co. and SK Hynix Inc.
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Comments posted on Facebook by presidential policy chief Kim Yong-beom fueled sharp volatility in Korean stocks on Tuesday as investors struggled to decipher the scope of the proposals. The benchmark Kospi fell as much as 5.1%, paring losses after a powerful policy adviser clarified that he wanted to tap “excess tax revenue” from the AI boom, rather than impose a new tax on corporate profits. An official in the presidential office told Bloomberg News that Kim’s words represented his opinion and were not the subject of official discussions.
Shares in Samsung fell 2.3%, SK Hynix fell 2.4%, and Kospi fell 2.3%.
The episode is the latest example of politicians drawing attention to how the advent of AI risks widening the gap between the haves and the have-nots. In South Korea, that concern has come from public demands that industry leaders share more of the spoils of rolling out AI infrastructure around the world. Although Kim’s ideas are preliminary, if they are disseminated it would mark one of the first concerted efforts by the government to share the benefits of the explosion.
Samsung predicts it will post 330 billion won ($220 billion) in operating profit this year, likely surpassing Apple Inc. and Alphabet Inc. to rank second to Nvidia Corp. among the most profitable companies in the world. SK Hynix is not far behind, with an estimated profit of 239 trillion by 2026.
Asian economies want to signal ownership of the AI boom, Franklin Templeton Institute chief investment strategist Christy Tan told Bloomberg Television. “That concept actually spreads the benefits of AI and development to citizens,” Tan said.
Kim’s 2,500 posts are a wide-ranging discussion of his thoughts on Korea’s booming economy and the impact of artificial intelligence. His argument is that government should start now to plan how technology will affect corporate profits, jobs and society.
The country is in a “very unique position,” he writes, because it has an integrated supply chain from memory chips, batteries, displays and more. It is likely to receive billions of dollars in additional tax revenue as profits rise at companies such as Samsung and SK Hynix.
The fixed budget fund can then be allocated to build a strong social foundation for Korea and reduce inequality among citizens. He points out that there will be many startup opportunities thanks to AI so that money can be used to support entrepreneurship and education for young people, as well as rich pensions for the elderly or to support artists.
He writes: “There is a rare historical event before Korea. We may become the first nation not only to provide AI infrastructure but also to spread the excess benefits of the AI era back into people’s lives.”
Although Kim later said he was not specifically referring to the excess corporate profits tax, the world’s biggest beneficiaries of the AI boom will likely face pressure to share their excess profits. “What the Korean official is currently proposing is an excessive tax, so tax residents are wary that they are footing the bill, instead of the government,” said Tan.
The size of any potential dividend, and other details of how Kim’s proposals might be implemented, were not immediately clear. Still, investors are paying attention.
In the time it usually takes to watch a football game, the Kospi index lost more than $300 billion. Its sudden – and repeated – reversal shows how jittery sentiment has become following a rally that lifted the benchmark index by nearly 86% this year through Monday. Although optimism remains strong – some Wall Street strategists peg the Kospi at 10,000 – foreign investors withdrew 5.6 billion worth of Kospi shares on Tuesday, bringing their sales this month to 14.4 trillion.
“After gaining about 80% this year, the market was becoming sensitive to any news that could cause panic among investors,” said Kim Dojoon, chief investment officer at Zian Investment Management. “Policy chief Kim’s post was simply because there was a misunderstanding in the market at the time.”
Less than five months into the year, Korean stocks have already passed their 2025 world-beating rally. The gains were mainly driven by Samsung and SK Hynix, whose shares have more than doubled this year.
If Samsung and SK Hynix meet the targets and post a combined profit of about 500 trillion won this year, for example, they could pay corporate taxes of more than 100 trillion won a year, according to Lim Jae-kyun, an analyst at KB Securities Co. That revenue could exceed the total of nearly 100 billion won by the government’s collection of approximately 6.
President Lee Jae Myung’s administration has emphasized “inclusive” growth, with policies aimed at increasing domestic income, regional development and support for small businesses and start-ups.
On Tuesday, Samsung and its labor union entered the final day of government-led wage talks in a bid to avert a strike that could disrupt operations at the world’s largest record company. Last month, tens of thousands of people rallied outside Samsung’s biggest chip hub to demand workers get a bigger share of AI profits. The company’s labor union wants 15% of the operating profit to be given to the chip-division workers.
The union has threatened an 18-day strike from May 21. Workers have pointed to a pay rise at SK Hynix, which last year agreed to allocate 10% of its annual operating profit to a performance bonus pool, as proof that they deserve more pay.
“The added value in the AI era is, by nature, embedded,” Kim wrote. Memory companies, key engineers and property owners in Seoul are likely to reap the biggest benefits, while most of the middle class may experience only indirect effects, he said.
–With help from Winnie Hsu and Peter Elstrom.
(Detailed updates to Kim’s post from section seven. An earlier version of this story corrected the total volume of Kospi sales this month.)
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