South Korea to use AI tax windfall to fund public projects

SEOUL: South Korea’s government plans to use a windfall in tax income from artificial intelligence chipmakers to set up a fund for public infrastructure projects, the presidential office said.

Rising global demand for advanced memory chips used in AI data centres has helped South Korean semiconductor giants post record profits this year, boosting national economic growth.

The success of Samsung Electronics and SK hynix in particular has led to a corresponding increase in government tax revenues.

During a meeting between the government and the ruling party on Sunday, presidential chief of staff Kang Hoon-sik said the “future response fund” would help finance large-scale projects centred around AI and the semiconductor industry.

It would also help to reduce inequality and support young people in accessing housing, founding startups and finding jobs, he said in comments shared with AFP on Monday.

“The excess tax revenue generated from the semiconductor boom at this critical moment for Korea’s future should not be spent carelessly,” Kang said.

He did not reveal how much money would be in the fund but said the government would review how to use it at a fiscal strategy meeting this month before seeking public input.

In an interview with the Dong-A Ilbo daily published Monday, Kang said some would be used to expand the infrastructure that supports chip factories, such as electricity and water supplies.

Samsung’s shares surged more than 170% and SK hynix’s more than 300% in the first half of the year – taking both firms’ market capitalisation past US$1 trillion.

Samsung is expected to announce strong preliminary second-quarter earnings on Tuesday, while SK hynix plans to raise 45 trillion won (US$29 billion) through a Nasdaq listing.

Both firms are involved in a massive public-private investment of 800 trillion won (around US$520 billion), announced last week, to build a new semiconductor fabrication hub in the southwest.

South Korea’s AI semiconductor boom has fuelled debate over how the tax windfall should be used.

In May, presidential chief policy secretary Kim Yong-beom suggested using excess revenue to support startups, provide assistance for young people, expand basic income programmes for rural and fishing communities, and support artists.

The boom has also strengthened workers’ demands for higher pay. Samsung avoided a major strike in May after reaching an agreement on worker bonuses with its largest labour union.