South Korea scales back capital gains tax on stock amid investor complaints

South Korea on Wednesday announced that it would scale back its plans to impose capital gains taxes on stock investments after numerous complaints from retail investors. However, taxes will, instead increase for top earners as part of changes in its annual tax code revision.

The decision came after retail investors called out the tax policy on social media, labeling it as one that “kicks away ladder” for upward social mobility.

The finance ministry had also proposed to increase income tax on earnings exceeding 1 billion Won ($838,040) a year, hiking up taxes from 45% from 42% in a bid to 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.

South Korea’s retail investors poured over 30 trillion won into local shares in the first six months of the year, marking it the largest on record for comparable periods.

South Korea’s KOSPI gained over 50% from the year’s lows as investors flocked to 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.