South Korea's AI Tax Proposal Triggers 5% Market Rout

South Korean presidential policy chief Kim Yong-beom ignited a market firestorm on Tuesday after proposing a 'citizen dividend' paid for by taxes on AI profits. In a Facebook post, Kim argued that the nation should redistribute gains from the AI boom that has enriched chip giants like Samsung Electronics and SK Hynix. The vague language caused the benchmark Kospi index to plunge as much as 5.1%, wiping billions in market value as investors scrambled to assess potential tax implications on the country's most valuable companies. Kim later clarified he intended to tap 'excess tax revenue' generated by the AI-driven economic expansion, not impose new levies. The clarification helped the Kospi pare most losses by day's end.

The episode underscores the intensifying global debate over how to tax the windfall profits from artificial intelligence. South Korea is home to two of the world's largest memory chipmakers, which have seen record revenues thanks to demand for AI training hardware. The proposal echoes similar discussions in the European Union and the United States, where policymakers are exploring wealth taxes on AI gains. For now, Kim's backtracking suggests South Korea is not ready to implement such a policy, but the market's jittery reaction signals that investors are taking the idea seriously. The incident serves as a warning that tech-heavy markets may face increased volatility as governments seek to capture a slice of the AI value chain.