"Black Tuesday" in South Korea: Tax on Unrealized Profits Crashes the Stock Market
On June 23, 2026, a real financial storm broke out in South Korea. The country's authorities put forward an unprecedented initiative — to tax not only actually received profits, but also unrealized (paper) profits from stocks and real estate. The market reaction was immediate and catastrophic, which is why this day has already been dubbed "Black Tuesday."
The essence of the proposal, announced at a forum in the National Assembly, lies in a radical change of fiscal philosophy. The authors of the bill — a powerful coalition including representatives of the Democratic, Progressive, and Social Democratic parties, as well as the "Rebuilding Korea" association — insist that the growth of wealth itself is a sufficient basis for taxation. They do not care whether the investor sold the assets and received real money in hand. The very fact of an increase in the portfolio's value is now proposed to be considered income.
The Logic of Absurdity and Investor Panic
Such an approach breaks traditional foundations. In the current system, capital gains tax is levied only after the profit is realized — that is, after the sale. The new bill, on the contrary, obliges investors to pay the state for "virtual" income that they have not yet received. This creates an absurd situation where, to pay the tax, people will be forced to forcibly sell off their own assets to find real money.
Panic gripped both institutional and retail investors. The quotes of leading companies on the KOSPI stock exchange collapsed within hours. Market participants rightly fear that such measures will finally kill long-term investments, deal a devastating blow to pension savings, and provoke a massive capital outflow to more friendly Asian jurisdictions.
International Precedent and Lessons from History
It is worth noting that South Korea is not a pioneer in this dangerous direction. In February 2026, a similar law was passed in the Netherlands, where a fixed rate of 36% per annum is now applied to unrealized profits from stocks, bonds, and even crypto assets. The result was not long in coming — local markets and startups began to rapidly lose ground. Skeptics are already citing the Dutch experience, warning that such a regime stifles innovation, pushes talent abroad, and increases pressure on the budgets of ordinary families.
Notably, this is not the first attempt by South Korean authorities to tighten the tax burden. In the fall of 2025, President Lee Jae-myung already tried to lower the threshold for the capital gains tax, which sparked furious protests from retail traders who wiped billions of dollars off the market in a week. The reform had to be shelved then. Now, apparently, the government has decided to go all-in.
Expert opinion: The initiative to tax unrealized profits is, in my view, one of the most destructive fiscal instruments imaginable for a developed capital market. It not only undermines investor confidence but also creates the risk of cascading sell-offs during any correction. If this law is passed, South Korea risks losing its status as one of Asia's key financial hubs. One can only hope that common sense prevails and the parliament does not repeat the fate of the Netherlands.