South Korea introduces tax on 'paper' profits: markets in shock
On June 23, 2026, a real financial storm erupted in South Korea. Authorities proposed taxing not only realized profits but also unrealized gains from stocks and real estate. The market reaction was immediate and catastrophic—this day has already been dubbed "Black Tuesday."
The essence of the new initiative, put forward by a powerful coalition including representatives of the Democratic, Progressive, and Social Democratic parties, as well as the "Rebuilding Korea" association, is as follows: investors will have to pay tax on the increase in asset value, even if they have not sold them. This refers to so-called "paper" or virtual profits that only exist on accounts until the moment of actual realization.
The authors of the bill, calling it "comprehensive income taxation," argue their position by stating that the growth of citizens' wealth should be taxed regardless of whether they have realized this income. According to their logic, it is enough that the value of the assets has increased.
Markets perceived this news as a declaration of war. The stock prices of leading companies on the KOSPI exchange collapsed within hours. Panic gripped retail investors, who rightly fear they will have to sell their assets to find cash to pay taxes on non-existent income. This kills long-term investments and creates a threat of massive capital flight from the country.
Why is this dangerous for the market?
Such measures are a direct blow to long-term strategies. Investors, especially those investing in pension savings or holding assets for years, will find themselves trapped. They will either have to sell assets to pay the tax or find money from other sources. This will inevitably trigger a new wave of sell-offs and a market crash. The experience of the Netherlands, which introduced a 36% tax on unrealized profits in February 2026, has already shown that such steps stifle innovation and force talent and capital to move to other jurisdictions.
Expert opinion: This initiative is a dangerous precedent that could undermine confidence in the South Korean market for years to come. If the state starts taxing profits you don't yet have, it will destroy incentives for long-term investing and provoke a mass exodus of capital to more friendly jurisdictions, such as Singapore or Hong Kong. This is a classic example of fiscal policy that kills the goose that lays the golden eggs.