South Korea plans record $531 billion budget on AI chip tax boom

South Korea is preparing a record 800 trillion won ($531 billion) budget for 2027, raising spending more than 10% above this year. 

President Lee Jae-myung’s government said that the budget hike is funded by an increase in tax revenue from South Korea’s booming AI chip industry. 

South Korea to increase its spending budget by 10%

South Korea’s Budget Minister Park Hong-keun laid out a framework involving raising the country’s spending by 10%, the largest Korea has ever set, at a national fiscal strategy meeting. This year’s spending plan, excluding supplementary budgets, stands at 727.9 trillion won. 

Park said the government expects national tax revenue to reach at least 500 trillion won ($331.6 billion) next year, which is well above the expected 412 trillion won. 

The extra inflow is due to an increased demand for high-bandwidth memory chips for AI data centers from SK Hynix (KRX: 000660) and Samsung Electronics (KRX: 005930). 

Park also said the government would cut roughly 50 trillion won ($33.2 billion) in existing spending, twice what they cut last year, by cutting underperforming programs and reviewing discretionary and mandatory outlays.

President Lee Jae-myung said the additional tax revenue is a precious resource for furthering the country’s global AI ambitions. Cryptopolitan reported in June that Lee unveiled roughly $1 trillion in spending on chips, data centers, and robotics alongside Samsung and SK Hynix leadership. 

What is the Future Response Fund? 

At the same meeting, President Lee introduced the Future Response Fund. It is a platform used to hold excess tax revenue and then redirect it into set priorities. Lee told the roughly 130 attendees the fund would focus on the future, youth, regions, and education through legislation. 

Under Korea’s National Finance Act, “excess tax revenues” have strictly defined uses such as repaying government bonds. But now, the government has coined a new term, “additional tax revenues,” and plans to impose a special law that will allow them to direct that money into the four areas (future, youth, regions and education) which are outside the current existing rules. 

The idea first came up a week earlier on July 5, when the presidential chief of staff Kang Hoon-sik suggested the creation of a fund paid for by taxes from semiconductor profits. 

Kang linked the fund to housing, starting businesses, and job support for people in their 20s and 30s. He also said it should help spread chip development outside the Seoul area.

Lee also said the government would widen its social safety net as AI reshapes the workforce, pledging protection for nonstandard workers whose numbers he expects to grow.

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