South Korean Official Proposes Using AI Tax Revenue for Citizen Dividends, Stirring Market Volatility

A senior South Korean official has proposed that the government distribute a "citizen dividend" funded by tax revenue from artificial intelligence profits, highlighting increasing calls to redistribute wealth from a boom that has benefited semiconductor giants like Samsung Electronics Co. and SK Hynix Inc.

The remarks, made in a Facebook post by presidential policy chief Kim Yong-beom, triggered significant volatility in South Korean equities on Tuesday as investors attempted to gauge the potential implications. The benchmark Kospi index initially plunged as much as 5.1% before recovering some ground after Kim clarified his suggestion involved utilizing "excess tax revenue" from the AI sector, not imposing a new windfall tax on corporate earnings. Shares of Samsung and SK Hynix recouped most of their early declines.

This incident reflects a broader global trend where policymakers are highlighting how the rise of AI could exacerbate economic inequality. In South Korea, this has manifested in public demands for leading companies to share more of the gains from the global AI infrastructure expansion.

Samsung, which saw its operating profit surge 48-fold in the first quarter, is forecast to become the world's second-most profitable tech firm, trailing only Nvidia Corp. and surpassing Apple Inc. and Alphabet Inc. SK Hynix is also projected to generate substantial profits, estimated at 239 trillion won for 2026.

"This also signals that Asian economies wish to demonstrate a stake in the shared digital and AI-driven future," commented Christy Tan, a senior investment strategist at Franklin Templeton Institute. "The proposal from the Korean official concerns excess tax revenue, which makes taxpayers cautious about potentially bearing the cost instead of the government."

The potential size of such a dividend and other implementation details remain unclear. Nonetheless, the market reacted swiftly.

The Kospi's sharp reversal and subsequent rebound illustrate the fragile sentiment following a rally that had lifted the index nearly 86% year-to-date through Monday. While underlying optimism persists—with some Wall Street strategists targeting 10,000 for the Kospi—foreign investors have been net sellers this month.

"The rapid sell-off suggests the trigger was the unexpected comments from Blue House policy chief Kim Yong-beom regarding 'AI dividends' for citizens," said Homin Lee, a strategist at Lombard Odier Singapore. "Sentiment appears to be recovering slightly as Kim moderated his stance by clarifying this was not a proposal for a windfall tax."

In less than five months, South Korean stocks have already exceeded their impressive 2025 rally. This performance has been largely driven by Samsung and SK Hynix, whose share prices have more than doubled this year.

The Kospi's plunge indicates that "investors can become uneasy at any time" due to the market's narrow breadth, where Samsung and SK Hynix are absorbing a large portion of liquidity, according to Yoon Joonwon, a fund manager at DS Asset Management.

Kim serves as a key adviser to President Lee Jae Myung, whose administration has prioritized "inclusive" growth through policies designed to increase household income, foster regional development, and support small businesses and startups.

Separately, on Tuesday, Samsung and its labor union concluded a final day of government-mediated wage negotiations, aiming to avert a strike that could disrupt operations at the world's largest memory chipmaker. Last month, tens of thousands of people rallied outside Samsung's primary chip facility, demanding a larger share of AI profits for employees. The company's union is seeking 15% of operating profit to be allocated to chip division staff.

The union has threatened an 18-day strike commencing May 21. Workers have cited SK Hynix's agreement last year to allocate 10% of its annual operating profit to a performance bonus pool as a benchmark for deserving higher compensation.

"Excess profits in the AI era are inherently concentrated," Kim wrote. He noted that memory chip companies, core engineers, and asset holders are highly likely to reap significant benefits, while much of the middle class may only experience indirect effects.