South Korea scraps plans to raise capital gains tax

South Korea has abandoned a controversial plan to lower the capital gains tax threshold for stock investors, in what would be President Lee Jae Myung’s first major policy reversal since taking office in June.

The decision follows months of opposition from Lee’s core voter base, many of whom are retail investors. The proposed changes — including lowering the capital gains threshold on stock holdings to 1 billion won ($717,535) from 5 billion won — raised questions about the government’s commitment to reviving the stock market. The plan sparked a selloff in August that erased billions in market value.

The government had framed the tax proposals as part of a broader effort to boost revenue and offset economic pressures from higher US tariffs. But officials shifted course after the plan was criticised as undermining investor confidence and stifling one of the world’s best-performing stock markets this year.

Lee, who campaigned on a promise to support Korea’s equity markets, is expected to pledge alternative measures to raise funds while prioritising policies that strengthen the financial system. The rollback marks an early test of Lee’s ability to balance fiscal demands with political commitments. It also underscores the influence of retail investors, a powerful bloc that helped propel South Korea’s market rally in recent years.

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