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South Korea's Record 80 Trillion Won Budget: AI Chip Taxes Fuel the Boom

South Korea is betting big on artificial intelligence. The government unveiled a record budget for fiscal year 2027, exceeding 80 trillion won (about 3.6 trillion Chinese yuan), with the main revenue source being tax growth from the surging AI chip industry. Compared to the 727.9 trillion won spending plan for 2026, this is a significant jump.

Three Super Projects Take Center Stage

The government made it clear that three 'super projects'—semiconductors, AI data centers, and physical AI—will get top priority for fiscal investment. President Yoon Suk Yeol said the government will take all feasible measures to ensure corporate investment projects proceed as planned. He emphasized that the newly generated tax revenue is a valuable resource that should play a role during the critical period when the global AI dominance competition is about to determine the outcome.

To fund this, South Korea plans to cut projects with poor performance by conducting a comprehensive review of discretionary and mandatory expenditures. The government will reorganize about 50 trillion won (approximately 225.3 billion Chinese yuan) in fiscal spending—roughly double the amount of the previous year. The idea is to free up funds by making large-scale adjustments to the existing fiscal spending structure, rather than relying solely on increased tax revenue.

A Future Response Fund

The government also announced the establishment of a 'Future Response Fund' as a strategic investment platform. This fund will allocate the newly generated tax revenue above the long-term trend level separately to focus on four key areas: youth, future growth engines, regional development, and talent cultivation. The initiative aims to convert the benefits of the AI industry into long-term national competitiveness and gain an advantage in the layout of future industries in South Korea.

Key Points

  • Record 80 trillion won budget for 2027, funded by AI chip tax revenue.
  • Three super projects: semiconductors, AI data centers, physical AI.
  • 50 trillion won in spending cuts to free up funds.
  • New Future Response Fund to invest in youth, growth, regions, and talent.