Key facts
- South Korea plans to create a future fund using excess tax revenue from a semiconductor boom.
- The fund aims to invest in growth engines, support younger generations, and address inequality.
- The government intends to channel a significant portion of future excess tax revenue into the fund.
- Norway's Government Pension Fund Global is cited as a potential model.
- Discussions are ongoing regarding the use of surplus funds, including potential citizen dividends or debt reduction.
South Korea is planning to establish a future fund, potentially a sovereign wealth fund, to utilize the significant extra tax revenue generated by a booming semiconductor industry. The government aims to invest these proceeds into new growth engines, provide support for younger generations, and address the growing issue of economic inequality.
Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol stated that a portion of excess tax revenue will be channeled into the fund, which will then be invested to generate returns and expand national wealth. This initiative is partly inspired by Norway's Government Pension Fund Global, the world's largest sovereign wealth fund, which is built on oil and gas revenues.
National tax revenue, which ranged between 340 trillion and 370 trillion won from 2023 to 2026, is projected to exceed 415 trillion won this year, with some forecasts reaching as high as 500 trillion won. This surge is attributed to strong first-quarter operating profits from major chipmakers like Samsung Electronics (57.2 trillion won) and SK Hynix (37.6 trillion won), which are expected to boost corporate tax revenue. Increased employee bonuses and a strong stock market are also anticipated to increase earned income and securities transaction tax receipts.
However, the use of this windfall is a subject of debate. Some advocate for using the surplus to reduce national debt and increase fiscal room, adhering to the National Finance Act which prioritizes settling grants and redeeming government bonds. Others, including presidential policy adviser Kim Yong-beom, have floated the idea of a "citizen dividend" to return some of the gains directly to the public, a proposal that has drawn criticism as socialist-style.
The discussion extends to whether chipmakers' supercycle profits should be shared more broadly. Labor Minister Kim Young-hoon has referred to semiconductors as a "public good" in the AI era, calling for discussions on a Korean-style social solidarity wage system. The government is preparing legislation to allow a portion of excess tax revenue to be reinvested in future growth through R&D and to be grown into future assets within the fund, with the fund's operation to be managed by top professionals without government interference.