Top presidential aide's proposal raises fears of anti-market thinking

Kim Yong-beon, the presidential chief of staff for policy, on Tuesday proposed a "citizen dividend" scheme that would return part of the windfall tax revenue generated by the semiconductor boom to the public.

After the proposal triggered controversy, the presidential office brushed it off as Kim’s personal opinion that had not been discussed internally. Nevertheless, the abrupt and radical suggestion from the government’s top policymaker bewildered people who place their trust in a capitalist market economy.

Kim wrote on Facebook that the fruits of the artificial intelligence infrastructure era are not generated by a handful of companies alone, but rest on an industrial foundation built collectively by the Korean people over the past half-century, adding that part of those gains should be systematically returned to the public. He mentioned "citizen dividends" as a concrete way of putting the idea into practice.

First, the anti-market undertones contained in the concept of distributing profits in the form of dividends to every citizen are deeply concerning.

The argument that semiconductor companies have grown on the back of special legislation, public infrastructure such as roads, electricity and water supply, and tax benefits is understandable to some extent. But that is entirely different from saying that those profits should therefore be distributed to the public.

In 2023, Samsung Electronics suffered a 15 trillion won ($10 billion) loss in its semiconductor business alone. The government and the public did not absorb any of those losses then. A structure in which corporate "windfall profits" are shared with the public, while companies alone bear the losses, is inconsistent with both fairness and basic economic principles.

Instead, Kim’s proposal gives the impression that the government also intends to take a slice of the hundreds of trillions of won in operating profits expected this year at Samsung Electronics and SK hynix, as labor unions, subcontractors, farmers and fisher groups, and even politicians, scramble for a share.

When companies earn profits, the government collects its due in corporate taxes. This is the mechanism through which profits are redistributed to society in a capitalist market economy. If the government seeks to take corporate profits by means other than taxes, it would need a legal basis enacted through legislation. Otherwise, it would amount to unfair double taxation, nearing coercion.

If there is excess tax revenue, it should primarily be used to pay down the national debt in line with the principles of fiscal management. Redistributing excess tax revenue to the people under the label of a "dividend" invites suspicions of a populist attempt at winning favor with cash payments.

Companies are fulfilling their social obligations by paying taxes and creating jobs.

If a company still has profits left after covering its costs, including taxes, debt repayments, payments to subcontractors and labor expenses, those profits belong to the shareholders. If profits are to be "shared with society," the decision likewise belongs to the shareholders.

Viewed from the perspective of enhancing industrial competitiveness, Kim’s understanding of the issue is overly complacent. Not only is the AI-driven semiconductor boom unlikely to continue forever, but major competitors such as the United States and China are aggressively closing the gap.

In these circumstances, is it not the role of the president’s chief economic aide to worry first about strategies for maintaining or expanding the lead? For tech companies, profits should be used first and foremost for investment in new technologies and facilities. Companies that fail to do so are quickly driven out of the market. Now is not the time to kill the goose that lays the golden eggs, but to raise more such geese.

Foreign investors reportedly dumped Korean stocks in large quantities on Tuesday after Kim’s remarks. His words may not have been the sole reason for the sell-off, but markets are highly sensitive to such signals. One of the government’s responsibilities is to safeguard the principles of the market economy so people can invest with confidence.


khnews@heraldcorp.com