"Black Tuesday" in South Korea: Tax on Unrealized Profits Triggers Market Collapse
On June 23, 2026, South Korean lawmakers proposed introducing a tax on unrealized profits from stocks and real estate. The initiative, announced at a forum in the National Assembly, triggered an immediate panic sell-off in the KOSPI market. This day has already been dubbed "Black Tuesday."
The Essence of the Tax Reform
It concerns taxing so-called "paper" profits—the increase in asset value that an investor has not yet realized through a sale. Essentially, the state demands payment of tax on income that does not yet exist in real money. The project is being promoted by a powerful coalition, including the Democratic, Progressive, and Social Democratic parties, as well as the "Rebuilding Korea" association and the Federation of Korean Trade Unions.
Supporters of the reform argue it is necessary to reduce the gap between the ultra-wealthy, who can avoid realizing profits for years, and ordinary workers who pay taxes on every paycheck. However, as practice shows, such steps pose a direct threat to long-term investments and pension savings.
Why Markets Crashed
The reaction was swift and extremely painful. Quotes of leading companies on KOSPI collapsed within hours. Investors are panicking: to pay the tax on notional income, they will be forced to sell assets. This kills the incentive for long-term holding of positions and triggers a massive capital outflow to more friendly Asian jurisdictions.
Notably, this is not the first attempt. In September 2025, President Lee Jae-myung tried to lower the threshold for the capital gains tax, but fierce protests from retail traders wiped billions of dollars off the market within a week, and the reform was scrapped. The current initiative is even more radical—it breaks the very foundation of the financial system.
International Context and Risks
South Korea is not alone in this endeavor. In February 2026, the Netherlands already passed a law imposing a fixed 36% tax on unrealized profits from stocks, bonds, and crypto assets. The result was immediate: local markets and startups began losing ground, and talented specialists started leaving the country. Repeating this scenario in Korea could have catastrophic consequences for the country's innovative economy.
Analyst Comment: A tax on unrealized profits is essentially a confiscatory mechanism that stifles liquidity and investment motivation. In the context of global competition for capital, such decisions are a step backward. The Korean market faces not just a correction, but a structural crisis of confidence, the consequences of which we will see in the coming quarters.