Korea plans future fund fueled by AI chip boom tax windfall

Korea plans to establish a Future Fund using tax windfall from the AI chip boom to drive long-term economic growth. The Ministry of Planning and Budget will allocate sharply rising corporate tax revenue to this fund, focusing on sectors like youth support, AI, energy, and education. The government highlights the AI industry's transformative impact across the economy and social systems, beyond just technological advancements. The Future Fund will support key areas such as youth development (employment, housing, marriage, childbirth), three major megaprojects (AI industry, physical AI, seven future-oriented sectors: small modular reactors, nuclear fusion, renewable energy, quantum technology, aerospace, advanced biology, and supply chains for advanced materials), and fiscal stability reforms. The fund aims to boost Korea’s potential growth rate and mitigate tax revenue volatility. The Budget Ministry distinguishes windfall revenue (exceeding long-term trends due to structural changes) from surplus revenue (unexpected short-term fluctuations). Estimates suggest the fund could range from 60 trillion won ($43.4 billion) to 100 trillion won, pending industrial cycles. Additionally, Korea proposes overhauling its education budget allocation mechanism to better reflect demographic decline (student population fell from 8.8 million in 2010 to 5.91 million in 2025). The new formula will use the previous year’s grant amount, three-year average nominal economic growth rate, and demographic changes, ensuring grants do not fall below the previous year’s level. The proposal will be reviewed by the Cabinet in September and submitted to the National Assembly on September 3.