2024.07.22. The Fair Economy — Rep. Lee In-seon of the National Assembly's Strategy and Finance Committee and Rep. Cho Seung-rae of the Public Administration and Security Committee, who lead the National Assembly AI Forum, recently announced that they co-sponsored a partial amendment to the 'Restriction of Special Taxation Act' on the 19th to expand tax credits for AI and cloud facility investment in order to gain an edge in the artificial intelligence (AI) technology hegemony race.
AI technology is being applied across diverse fields such as transportation, healthcare, and services, establishing itself as a core technology of the digital age that influences not only daily life but also national security. Furthermore, the global paradigm for information and communication technology (ICT) is shifting from building in-house information systems to cloud computing to enhance productivity and drive innovation.
As the industrial paradigm rapidly reorganizes around AI, the bill was introduced by the National Assembly AI Forum, comprising members of both ruling and opposition parties, to reflect the trend that AI competitiveness directly translates into national competitiveness. It includes tax credits for large-scale private investment in AI infrastructure.
AI competitiveness hinges on high-performance computing infrastructure such as GPUs, NPUs, servers, and storage. In particular, cloud computing is an essential element for developing and deploying AI models that enable large-scale data processing and analysis. While large-scale private investment is necessary, the high cost of building initial essential infrastructure remains a burden for private companies investing in AI technology development, prompting calls for government policy support such as tax incentives.
Major advanced countries, including the United States, Japan, and the EU, are already promoting AI technology development through various tax benefits and research and development support. China is also leaping forward as an AI powerhouse through large-scale national-level investment. Major nations are actively supporting private investment in AI and cloud infrastructure.
According to an analysis by the National IT Industry Promotion Agency (NIPA) titled 'Estimation of Tax Revenue Effects from Tax Support for AI and Cloud,' the total expected tax reduction from tax support is 2.3816 trillion won over four years (2023-2026). However, investment is projected to increase by 17.2723 trillion won, generating an additional 3.5980 trillion won in tax revenue through increased corporate and value-added taxes. Overall, the net tax revenue effect is analyzed to be an increase of 1.2165 trillion won. Over 10 years (2023-2032), it is expected to contribute to national economic growth by increasing production by approximately 40 trillion won and creating about 150,000 jobs.
Rep. Cho Seung-rae, the research chief of the National Assembly AI Forum, said, "If this amendment passes, it will promote large-scale private investment in cloud computing resources and telecommunications facilities, which are the practical infrastructure of AI. Ultimately, we can expect various positive effects, such as improving the technological capabilities of the entire industry, economic growth through strengthening national competitiveness, and building sovereign AI. Through this, we expect that an important foundation will be laid for the Republic of Korea to leap forward as a global AI powerhouse."
Rep. Lee In-seon, the representative lawmaker of the National Assembly AI Forum, said, "This amendment is an important measure to support AI technology development at the national level and maximize economic and security benefits. The government also desperately needs active policy support to help companies secure AI technology and expand infrastructure."
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