South Korea's conservative ruling camp agreed to abandon planned tax cuts for the rich and for big business groups in a bid to improve its image before elections next year.

The agreement came on Wednesday at a meeting of senior officials from the government, the president's office and the ruling Grand National Party (GNP).

The conservative ruling party has sought to dispel its image as a party for the wealthy and the conglomerates before a general election next April and a presidential poll in December 2012.

Government officials accepted the party's demand to call off tax cuts for conglomerates and the rich and to spend the savings on welfare for ordinary people, the GNP said in a statement.

The government will go ahead with tax cuts for small- and medium-sized firms to expand resources for social welfare and maintain fiscal soundness, it said.

A plan to cut company tax by two percent to 20 percent will now apply only to firms making less than 50 billion won ($46 million) a year.

And the government has dropped a plan to cut the personal income tax rate for those making more than 88 million won a year to 33 percent from 35 percent.

Welfare has emerged as a key political issue since GNP Seoul mayor Oh Se-Hoon resigned last month, after failing in an attempt to halt an opposition programme which provides free school meals for all children in the city.

He called a referendum on the programme but it failed to attract enough voters to be valid.