Experts say 'excess profit' concept is ill-defined

Calls grow for open public debate on the issue

President Lee Jae Myung speaks at a press conference marking the first anniversary of his inauguration, held at Cheong Wa Dae's Yeongbingwan on Monday. [Yonhap]
President Lee Jae Myung speaks at a press conference marking the first anniversary of his inauguration, held at Cheong Wa Dae's Yeongbingwan on Monday. [Yonhap]

A string of inconsistent messages from the presidential office and cabinet ministers on "excess profits" has left the public confused, with experts saying the government's inability to settle on a single term reflects a fundamental flaw in the concept itself.

The controversy began at Cheong Wa Dae. Presidential Policy Chief Kim Yong-beom argued on Facebook on May 11 that "a portion of the fruits of the AI infrastructure era should be structurally returned to all citizens," proposing that excess tax revenue collected from chipmakers be distributed to the public under a scheme he tentatively called a "national dividend." In a post exceeding 7,000 characters, however, Kim alternated between the terms "excess tax revenue" and "excess profit," writing that he wanted to attach the working name "national dividend" to the principle of institutionalizing what he called "structural excess profit."

As the controversy grew, President Lee stepped in. In a May 13 post titled "No opinion-manipulation fake news," Lee said Kim's actual point was about "reviewing a plan to distribute as a national dividend the excess tax revenue generated by excess profits in the AI sector." He accused some media outlets of distorting the remarks to spread what he called malicious misinformation — that Kim had proposed distributing corporate excess profits directly to the public. The episode also prompted Bloomberg to issue a correction after its initial report, which had focused on the "excess profit" framing and was seen as contributing to a sharp drop in South Korean stocks.

Cabinet ministers then weighed in with their own takes. Employment and Labor Minister Kim Young-hoon said on May 27 that he would explore the possibility of a "Korean-style social solidarity wage" to discuss how to redistribute the excess profits of large corporations. He added that while excess tax revenue was the government's share to distribute, excess profits referred to net profit after taxes, financing costs and selling, general and administrative expenses had all been deducted.

Just two days later, however, Trade, Industry and Energy Minister Kim Jung-kwan struck a different tone, saying it was "a critical moment to channel semiconductor industry profits into productive reinvestment for the future" and calling on the government to "harness the AI boom to secure a growth engine for an industrial leap." His remarks were widely read as placing greater weight on reinvesting both excess profits and excess tax revenue into future industries. Cheong Wa Dae moved to smooth over the apparent divergence, saying the labor minister had spoken from labor's perspective and the industry minister from industry's.

Amid the ongoing debate, President Lee sent another message on excess profits while on a European tour. In an interview published Wednesday by The Economist, Lee was quoted as saying that the rise of industries generating enormous excess profits may require a reexamination of existing tax and distribution systems, and that using a portion of those excess profits to introduce a basic income — supporting consumers' spending capacity — could be a highly useful policy option.

Cheong Wa Dae said the president's remarks were "not a reference to any specific company or issue," describing them as addressing "the challenges of the era that may one day be confronted in order to sustain and maintain the capitalist market order amid the great transition to the AI age."

In political and business circles, the episode has been read both as a genuine policy clash and as a deliberate effort by the government to in effect steer public debate on the issue.

Kang Sung-jin, an economics professor at Korea University, said the concept of "excess profit" simply does not hold up when applied to the private sector. "The question is: what is the benchmark for 'excess'?" he said. "The reason the government cannot even settle on a unified term is that the term itself is problematic."

He added, however, that "there may be some degree of implicit consensus forming," and that the government "may be wrestling with how to actually put it into practice."


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