Korea launches tax investigation on major private cram schools

[Photo by Yonhap]

The South Korean government has launched a special tax investigation targeting major private education companies, including MegaStudy, on growing calls for the dismantling of private cartels as the first step in education reform. This signifies the government’s all-round pressure on the private education industry is in full swing.

According to sources, the National Tax Service deployed investigators to the headquarters of MegaStudy, Sidae Injae and Jongro Academy on Wednesday, conducting simultaneous tax investigations. This is categorized as a special tax investigation, setting it apart from regular inspections.

Earlier, President Yoon Suk Yeol publicly blamed the killer questions in the College Scholastic Ability Test for fueling the private education frenzy.

As a consequence, the head of the college admission department at the Ministry of Education was relieved of their duties, while the head of the Korea Institute of Curriculum & Evaluation, responsible for overseeing the college entrance exam, submitted his resignation. Throughout this process, the government has consistently aimed sharp criticism at private education companies, seeking to dismantle their cartel-like practices.

The presidential office has taken a tough line, saying “If law enforcement measures are deemed necessary, they will be duly considered.”

Given the current circumstances, speculations have arisen regarding the possibility of an extensive joint inspection of private cram schools. Since June 22, the Ministry of Education has been actively collecting reports through a malpractice reporting center, which deals with suspicions of cram school collusion, mandatory textbook purchases, excessive tuition fees, as well as false and exaggerated advertising.

A National Tax Service official declined to comment on specific instances pertaining to individual tax investigations.

The cram school industry is grappling with uncertainty as they await to discern the extent of the government’s measures.

Industry insiders anticipate that the current tax investigation may affect star instructors earning substantial annual salaries ranging from billions to tens of billions of won, as well as small and medium-sized cram schools.

MegaStudy, in response, has expressed its willingness to “fully cooperate with the tax investigation in a sincere manner.” Jongro Academy announced its commitment to “prioritizing cooperation with the authorities while enhancing student management.” Sidae Injae said it will “take this opportunity to further consider and work on its social role.”