Proposal of 'Special Purpose Tax' on AI Excess Profits...Business Community Warns of "Undermining Market Principles"

Ministry of Labor Holds Forum on N% Performance Bonuses
"Special Purpose Tax Needed to Strengthen Competitiveness in Relevant Industries"

There has been a proposal to recover a portion of large corporations' excess profits generated by artificial intelligence (AI) technological innovation in the form of a "special purpose tax," to be used for research and development (R&D), hiring young workers, and strengthening the industrial ecosystem. In contrast, business sector representatives made it clear that redistributing rewards for innovation runs counter to market principles.

On July 14, the Ministry of Employment and Labor held a forum titled "A New Path for Social Innovation in Line with AI Technological Innovation" at Peace & Park in Yongsan-gu, Seoul, to discuss new social contract measures needed in the age of AI. The forum was organized to formalize discussions on the "Korean-Style Social Solidarity Wage," a concept proposed by Minister of Employment and Labor Kim Younghoon. The forum was initially scheduled to debate the Korean version of the social solidarity wage, based on the Swedish model, which aims to narrow wage gaps among workers in the same industry or sector. However, the event was postponed and held on this day due to controversy over whether the government was interfering in corporate wage decisions.

Minister Kim previously stated in May, following wage negotiations at Samsung Electronics, that it was necessary to initiate a public discussion on how to share the excess profits generated by AI technological innovation. The forum was attended by representatives of labor and management, as well as experts in economics, business, welfare, and labor, and members of the National Assembly, who discussed changes in the labor market and profit distribution measures following the spread of AI.

Professor Sungjin Kang is speaking at the forum on new social innovation paths in line with AI technological innovation held on the 14th at Peace & Park in Yongsan-gu, Seoul. Photo by Yonhap News

"Reinvesting AI Excess Profits into the Industrial Ecosystem through a Special Purpose Tax"

Professor Heungjun Chung of Seoul National University of Science and Technology, who gave the main presentation, diagnosed that the massive excess profits earned by semiconductor and graphics processing unit (GPU) companies through AI technological innovation are difficult to distribute appropriately using the conventional performance bonus systems alone. Professor Chung stated, "Distributing returns in consideration of the various stakeholders who have contributed to a company's growth can ensure both sustainable corporate development and the advancement of the industrial ecosystem."

He proposed recouping a portion of corporate excess profits in the form of a "special purpose tax." The idea is to design a special tax used solely for specific purposes—not as general revenue—similar to the reconstruction excess profit recapture system, which collects a part of the development profits resulting from reconstruction projects. Professor Chung explained, "It could be used exclusively for areas that enhance industrial competitiveness, such as R&D investment within companies, modernization of industrial complexes, hiring young workers, and improving the welfare of subcontracted and small and medium-sized enterprise workers." He also suggested examining measures such as paying bonuses based on net profit rather than operating profit, establishing a negotiation system that focuses on performance bonuses, and setting up a "national wage committee" to oversee wage policies.

Another presenter, Professor Dongyul Yoon of Konkuk University, proposed "social solidarity investment" as a new model for the social contract, instead of the social solidarity wage. Professor Yoon said, "High industrial volatility and the lack of a trickle-down effect undermine the effectiveness of simple wage redistribution," adding, "The solution in the AI era is not mere income transfer, but investment to accumulate future capabilities." He stressed that while AI creates significant added value, it can also deepen polarization in the labor market, and emphasized that investments in joint innovation between primary contractors and subcontractors, nurturing future talent, supporting industrial transition, and expanding the social safety net could lead to both national competitiveness and inclusive growth.

Kim Younghoon, Minister of Employment and Labor, is delivering the opening remarks at the discussion forum on new social innovation paths in line with AI technological innovation held on the 14th at Peace and Park in Yongsan-gu, Seoul. Photo by Yonhap News.

Business Community: "Undermining Innovation Rewards...Weakening AI Competitiveness"

The business community expressed concern over the proposal to recover corporate excess profits through a separate tax. Yongyeon Hwang, Executive Director of the Korea Employers Federation, stated, "Demands to share even more of operating profits run counter to the basic principle of capital markets that risk and reward must be balanced," adding, "To create a virtuous cycle for the AI transition, it is more important to support corporate innovation and adapt the labor market, rather than to redistribute profits."

Sangho Lee, Director of the Economic Division at the Federation of Korean Industries, pointed out, "Corporate profits are the core driver of innovation and investment—the very foundation of a free market economy and capitalism." He added, "Profits are both the reward for innovation and the market signal that drives investment and production. If they are seen solely as a target for redistribution, it may distort the efficient allocation and distribution of resources."

He also emphasized, "Four years ago, domestic companies posted massive operating losses due to a slump in the memory sector," continuing, "Yet even during these downturn cycles, Samsung Electronics and SK hynix continued to invest heavily in the future." He stressed that the substantial profits now being realized are a result of maintaining large-scale investments even during previous downturns.

The Ministry of Employment and Labor, beginning with this forum, will continue discussions with another forum on "Corporate Investment and the Future of Work in the AI Era" hosted by the Ministry of Trade, Industry and Energy on July 15, and from next month will intensively discuss various challenges emerging in the process of industrial transformation toward AI.

Kim Younghun, Minister of Employment and Labor (center), is taking a commemorative photo with attendees at the forum on New Social Innovation Paths in Line with AI Technological Innovation held on the 14th at Peace and Park in Yongsan-gu, Seoul. Photo by Yonhap News

This content was produced with the assistance of AI translation services.