"Samsung Electronics and SK hynix are keeping Korea afloat"... Corporate tax projected to reach 124 trillion won next year

According to Financial News, the recovery in the semiconductor sector, led by Samsung Electronics, is expected to have a positive impact on the Korean government’s tax revenue. Jae Gyun Lim, an analyst at KB Securities, said on the 9th, "If Samsung Electronics posts operating profit of 300 trillion won and SK hynix 200 trillion won next year, the corporate taxes the two companies will pay in 2027 will reach about 74.9 trillion won and 49.9 trillion won, respectively, for a combined total of roughly 124.9 trillion won."
He pointed out that Samsung Electronics’ operating profit for the first quarter of this year far exceeded market consensus, and predicted that profit forecasts for semiconductor companies will be revised sharply upward.
Forecasts suggest that Samsung Electronics’ annual operating profit in 2026 will surpass 300 trillion won and could reach the high 300 trillion won range. SK hynix is also expected to generate operating profit close to 200 trillion won.
Lim said, "Earnings surprises at companies lead, with a time lag under the Corporate Tax Act, to a surge in the government’s corporate tax revenue next year." He added, "The corporate taxes that Samsung Electronics and SK hynix alone will pay next year are likely to easily exceed the government’s entire corporate tax target for this year."
Under the specific scenario Lim presented, if Samsung Electronics earns 300 trillion won and SK hynix 200 trillion won in operating profit next year, the corporate taxes they will owe in 2027 will be 74.9 trillion won and 49.9 trillion won, respectively, totaling about 124.9 trillion won. This would far outstrip the projected annual corporate tax revenue for 2025 of 84.6 trillion won and this year’s corporate tax target of 86.5 trillion won. Even under very conservative assumptions about earnings improvements at other listed companies, total corporate tax revenue in 2027 could rise to around 202.3 trillion won, which would be at least 93.9 trillion won more than the government had expected when it drafted past budget plans, signaling a "tax windfall."
Strong corporate earnings are expected to bolster national fiscal soundness not only through higher corporate tax receipts but also through increased income tax revenue, as companies pay out large performance bonuses.
Lim noted, "Improvement in the semiconductor cycle can increase the size of bonuses paid to employees, which in turn can create a virtuous cycle by boosting income tax revenue." He continued, "For example, if SK hynix allocates 10% of its operating profit as a bonus pool, the bonuses paid out next year alone would reach 16 trillion won, generating roughly 6 trillion won in income tax."
He added, "If you factor in Samsung Electronics’ bonus payouts and deferred payments from previous years, the impact on income tax revenue will be even greater. This would become a key driver enabling the government to secure fiscal space without increasing government bond issuance."
Lim assessed that the government bond supply-and-demand environment in 2027 and 2028 will turn highly favorable thanks to tax inflows that exceed expectations. "This will send a strong positive signal to the bond market," he said, emphasizing that "the burden of issuing government bonds after 2027 will be very low."
Based on the massive excess tax revenue the government secures, there is also a possibility that it will curb additional bond issuance or even move toward "net repayment" by paying down existing debt. Lim explained, "If net repayment actually occurs, the bond market is likely to see it as a powerful trigger for lower interest rates and higher bond prices. Although uncertainty remains due to the volatility of the semiconductor cycle, the current solid earnings outlook strongly supports the view that the trend of rising tax revenue will continue through 2028."
He concluded, "Bond investors should not be fixated solely on the immediate pressure from issuance volumes, but instead should make investment decisions based on the long-term changes in supply and demand that will result from improved semiconductor earnings."
fair@fnnews.com Han Young-joon Reporter