The plight of the “2030 Generation” in South Korea, a term referring to those in their 20s and 30s, is a pressing societal issue. The exorbitant costs associated with marriage, childbirth, and early childhood education are increasingly weighing down young adults in the country. The Korean Tax Authority (KTA) has now stepped in to scrutinize these high-cost sectors, launching a tax investigation into a total of 46 businesses, including wedding studios, dress and make-up services (SDM), postnatal care centers, and English kindergartens.
A Closer Look at the Economic Struggles Faced by the Younger Generation
For the 2030 generation, the cost of preparing for marriage and raising children has been skyrocketing, framing these life stages as onerous financial paths rather than periods of joy. The high-cost market for these stages often forces young adults to become ‘slaves’ to the exorbitant charges imposed by those who offer essential services such as studio photography for weddings, postnatal care services, and English kindergartens. These sectors have all been heavily criticized for their inflated prices and unregulated practices, especially due to their sheer dominance over young consumers.
The KTA has identified that these market players—while burdening consumers with excessive charges—are also evading their tax responsibilities. They are reported to use various schemes such as omitting sales, splitting business locations, and inflating expenses to avoid taxes. The businesses under investigation include 24 photostudios, bridal shops, and make-up service providers (SDMs); 12 postnatal care centers; and 10 English kindergartens.
Drilling Down into the Tax Evasion Practices Uncovered
The KTA found that these companies employed several strategies to evade paying their due tax. For instance, opaque pricing structures and hidden costs that deceive consumers were rampant among the SDM businesses. Aside from hiding the true cost of their services, they directed additional payment into several layers of bank accounts to dodge income reporting. Cases were discovered where business owners would set up additional business entities under a relative’s name to split the revenue, in effect reducing their taxable income.
Similar tax evasion methods were observed in postnatal care services. Despite their obligation to issue receipts for cash transactions, some centers used non-issuance of receipts as a condition for offering discounted cash prices. Others used funds from unreported income to purchase high-value real estate or lavish lifestyle goods. They were found to rent their properties at extortionate rates, raising their income illegally.
As for the early childhood education institutes primarily focusing on teaching English, the KTA found these establishments not only to receive exorbitant tuition fees but also to unlawfully collect cash for book fees and extracurricular activity expenses. They would then omit these proceeds from their tax reports. Some establishments also surfaced that were found to have funded the overseas education of their children from unreported income. Others were found to have falsified expenses through fake transactions with other business entities established under the names of their family members.
Government’s Further Measures & Future Direction
In response to such malpractices, the KTA has pledged to conduct rigorous tax audits. It will thoroughly examine the companies’ opaque income structures and cash outflows, and ensure that those failing to issue cash receipts will face a penalty surcharge.
The investigation will consider not just the companies themselves but also related parties including family members, tracing their wealth accumulation processes. Any tax evasion practices detected could lead to criminal charges under the Taxes on Crimes Punishment Act.
Emphasizing its commitment to tackling the issues facing the young adult generation, the KTA stated that it will continue to actively seek out instances where businesses impose excessive financial burdens on these consumers while evading taxes. By doing this, the authority seeks to enhance public confidence by tackling unfair practices and deliberate tax evasion in the sectors that have significant impacts on everyday living.
Disclaimer : This content is a translation of material originally published in Korean by the National Tax Service of the Republic of Korea. While efforts have been made to ensure accuracy, this translation is provided for informational purposes only and does not carry legal weight. In the event of any discrepancy, the original Korean version shall prevail. Users should consult the official Korean documents for precise interpretation. This translation does not constitute legal advice. The translators and publishers shall not be held liable for any loss arising from reliance on this translation.