Koo Yun-cheol floats income tax cuts, education subsidies for workers at mega-project sites

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol said Tuesday the government is considering income tax reductions and child education subsidies for workers who relocate to regions hosting the government's three major mega-projects.

Speaking in a phone interview on MBC Radio's "Kim Jong-bae's Focus" that day, Koo said the government is reviewing options including income deductions and tax credits, taking into account the preferences of workers in those regions.

Koo described the three mega-projects as carrying far greater civilizational significance than the construction of the Gyeongbu Expressway and the drive to build heavy and chemical industries under President Park Chung-hee, or the IT revolution under President Kim Dae-jung. "Fortunately, South Korea is well prepared, and if we respond with a full-scale, all-out effort, this will be an enormous opportunity," he said.

Addressing concerns about regional imbalance, Koo said the government plans to make use of the entire country. He outlined a division of roles in which the Honam region would serve as a second semiconductor production hub after the greater Seoul area, the Chungcheong region would handle packaging, and the Yeongnam region would specialize in materials, parts and equipment needed for AI — making the entire Korean Peninsula a single AI semiconductor ecosystem.

On corporate support, Koo said the government intends to back research and development as well as investment, and will consider carryover deductions for companies that pay taxes now but face periods when they cannot in the future.

Koo said the government is preparing to announce its real estate tax reform plan around the end of July.

He said the guiding principle is that housing should be for "living, not buying," with the market oriented around owner-occupiers. "The government will not decide unilaterally — I will listen to public opinion and voices from the field before finalizing the government's position," he said.

Asked about specific measures such as adjusting the fair-market value ratio and scaling back the long-term holding deduction for non-residents, Koo declined to give a direct answer, saying he would look into those proposals as part of the public input process.

When the host asked whether it was appropriate to address both property holding taxes and transaction taxes at the same time, Koo said the two needed to be considered together to achieve the right balance.

On corporate tax revenue from the semiconductor boom, Koo said companies are expected to post hundreds of trillions of won in operating profit, but that the government has not yet tallied exact figures. He said a reliable forecast would require first-half earnings results and the August interim corporate tax payments.

Asked specifically about semiconductor companies, Koo cited FnGuide projections showing Samsung Electronics and SK hynix alone are expected to post combined operating profit of 600 trillion won ($390 billion) this year. "Even at an average tax rate of 20 percent, that is an enormous sum — these two companies will essentially be paying back all the corporate taxes they owe," he said.

On a proposed "future response fund" to be financed by surplus tax revenue, Koo said he prefers the term "additional tax revenue" and that the government is internally reviewing how to use it for work that will make South Korea irreplaceable.

Asked whether a large share of the fund would go toward additional power and water supply for the semiconductor industry, Koo said support must also extend to other innovative industries — including robots, physical AI, shipbuilding and aviation — through infrastructure and R&D backing. He added that AI education for youth and startup support could also be part of the future-response agenda.

On when a detailed blueprint would be released, Koo said the Ministry of Planning and Budget is currently working on it, adding that related legislation should ideally be submitted before the regular National Assembly session in September given the urgency involved.

On next year's budget, Koo said the government will significantly expand support to address challenges facing Korean society — including AI development, polarization, livelihoods and structural reform — and will calibrate the overall fiscal size based on revenue conditions, which he described as favorable.

When the host noted that Samsung Electronics posted 89.4 trillion won in operating profit in the second quarter and expressed hope for an expansionary fiscal stance, Koo said, "That is what we will do."