
Fact of the Week: Industries Impacted by a Quasi-Robot Tax in South Korea Reduced Industrial Robot Installations by 28 Percent
Source: Svea Hotmann, et al., “Investment Effects of a Quasi-Robot Tax: Evidence from South Korea,” Leibniz Information Centre for Economics, no. 308 (2025).
Commentary: Robots have been shown to increase productivity and have the potential to increase manufacturing work in developed countries. Yet there has been an international push to tax robots, a move that could stifle innovation and discourage the adoption of this productivity-enhancing technology. South Korea, the country with the highest robot density (robots installed per 10,000 workers), reduced its tax credit for automation in 2018 from 7 percent to 3 percent for large firms, thereby increasing the tax cost of robotics investments and effectively imposing a quasi-robot tax. Following this reduction in the tax credit, South Korean industries, on average, reduced robot installations by 28 percent compared with their Japanese counterparts. Additionally, while some firms shifted investment away from automation and toward increasing employment, this shift was observed only among financially unconstrained firms. On average the reduction in the tax credit had a statistically insignificant effect on employment.
