SEOUL (Reuters) -- South Korea on Wednesday scaled back plans to impose capital gains taxes on stock investments in response to complaints by retail investors, but said it will hike taxes for top earners as part of changes in its annual tax code revision.
It comes after retail investors took to social media and called the tax yet another policy that "kicks away ladder" for upward social mobility, after skyrocketing property prices have priced many out of home ownership in recent years.
The finance ministry also proposed to hike income tax on earnings exceeding 1 billion won ($838,040) a year to 45% from 42% currently, which will help offset the expected loss in revenue from changes in the capital gains tax.
Taxes of up to 25% will be imposed from 2023 on annual capital gains exceeding 50 million won ($41,650) a year for retail investors who trade listed shares. The tax was previously due to kick in on capital gains exceeding 20 million won.
Policy tweaks aim to "better support retail investors and help them build up financial wealth amid (a) low interest rate environment," the ministry said in a statement.
The finance ministry also said stock transaction taxes will be cut in phases to 0.15% by 2023 for KOSPI-listed shares from 0.25% currently.
South Korea's retail investors poured over 30 trillion won into local shares in the first six months of the year, the largest on record for comparable periods.
The benchmark KOSPI has gained more than 50% from the year's lows as investors seek to buy into a cheapened market, backed by ample liquidity amid record low interest rates.
The revised capital gains tax proposal on stock investment will affect 150,000 investors, or the top 2.5% of all stock investors, the ministry said.
Separately, the government will start taxing capital gains from cryptocurrencies. Starting October 2021, any annual gains of more than 2.5 million won from trading of cryptocurrencies will be subject to a 20% capital gains tax, for local tax-paying residents.
The tax code revisions are subject to parliamentary approval, once it is submitted to the National Assembly by September 3, it said.