"Black Tuesday" in South Korea: Tax on Unrealized Profits Triggers Market Collapse
Tuesday, June 23, 2026, will go down in the history of the South Korean financial market as "Black Tuesday." On this day, a powerful coalition of politicians and public organizations introduced a bill proposing to tax not only realized but also unrealized (paper) profits from stocks and real estate. The market's reaction was immediate and catastrophic: key KOSPI indices collapsed, and panic gripped millions of retail investors.
The essence of the proposal, put forward at a forum in the National Assembly, lies in a radical shift in fiscal paradigm. Authorities want to levy a tax on the increase in asset value, even if the investor has not yet sold them and received actual money. In other words, you owe the state because your assets have theoretically increased in value.
Why did the market crash?
The logic of investors is simple and brutal. If the law is passed, asset holders will have to find liquid cash annually to pay taxes on "fictitious" income. This automatically kills long-term investments: holding stocks for years becomes financially disadvantageous and risky. The only way to avoid a cash flow gap is to sell off portfolios, which is exactly what we observed. Capital is massively fleeing the market, and citizens' pension savings are directly under threat.
Notably, this is not the first attempt to tighten the tax regime. Back in February, lawmakers proposed lowering the tax-free threshold for real estate sales, and in April, cutting benefits for long-term investors. However, the current initiative to tax unrealized profits represents an entirely new level of fiscal pressure, unprecedented for the South Korean securities market.
It is worth noting that a similar precedent already exists. In the Netherlands, since February 2026, a fixed 36% tax has been in effect on unrealized profits from stocks, bonds, and crypto assets. The result was swift: local markets and startups began to lose ground, and talented specialists started leaving the country. Critics of the Korean initiative rightly point to this negative experience, predicting a stifling of innovation and a flight of capital to other Asian jurisdictions.
Expert opinion: The initiative of the South Korean authorities is a classic example of how the desire to "fairly" tax the rich can backfire. Instead of replenishing the budget, we risk seeing a mass exodus of capital and a market crash that will hit the middle class and pension funds the hardest. The market always finds a way to escape excessive regulation, and in this case, that way is a panic sell-off.