The Educational Testing Service, a U.S.-based TOEFL test organizer, has an office in Samsung-dong ETS. If tax authorities see the office as a business outlet that meets their criteria, ETS will be subject to taxation in Korea.
/ Korea Times Photo by Shim Hyun-chul |
By Kang Shin-who
Staff Reporter
Nonprofit American test provider ETS is exempted from taxation, even though it earns tens of millions of dollars and maintains an office in Korea.
Last year, the organization - whose name stands for Educational Testing Service - brought in total sales of $21,361,350 from 125,655 Korean test takers but paid not a cent on the proceeds. The figure was calculated by multiplying the fee for one test set, $170, by the number of tests administered.
Under the current tax regulations, both profit and nonprofit organizations have to pay income tax - 22 percent of net profit - if they run a business that produces income.
The situation has raised questions marks over fairness because other providers pay taxes. ETS has long been under fire for raking in vast proceeds without making any notable social contributions in Korea.
Korea is said to be its No. 1 customer, but it was only last year that it started to provide scholarships for a select number of students.
ETS was attacked in 2006 for lacking the kind of behavior expected of a good corporate citizen.
The organization had failed to provide enough tests, leaving some applicants stranded - also its computer testing system crashed.
According to a source from the National Tax Service, no taxes have been levied on the TOEFL test organizer. ETS is given tax exemption on the assumption that it does not have a business outlet.
However, ETS Korea has maintained an office since 2007. Asked whether or not it is a business venue, an official from the tax authorities said they are unsure about its status here.
"We didn't know whether ETS has an office here and will review whether it is a venue for business purposes or a place merely for market research and public relations," the source said.
Repeated requests for its tax status were made to Communications Korea, the PR agency for ETS Korea, but it failed to respond.
In the case of TOEIC, another test developed by ETS, YBM, as the operator of the tests in Korea, pays taxes on income and royalties to ETS as the exam developer.
All domestic English proficiency test organizers are also subject to income tax, although applicants account for only 25 percent of the total English test takers in Korea, according to the Ministry of Education, Science and Technology.
Korea currently has seven English ability tests authorized by the ministry - the Test of English Proficiency developed by Seoul National University or TEPS, the Practical English Level Test (PELT), the Test of English as a Second Language (TESL), English the Speaking Proficiency Test (ESPT), the Test of the Skills in English Language (TOSEL), the Multimedia Assisted Test of English (MATE) and the Foreign Language Examination (FLEX)
"We pay 3,000 won in value added tax for each test along with income tax," said an official from Seoul National University in reference to its TEPS exam.
An official from Hankuk University of Foreign Studies, the FLEX organizer, said that tax should be imposed on TOEFL tests because its test developer is also non-profit and is taxed.
Some 60,000 English learners took the FLEX last year.
TOEFL, short for Test of English as a Foreign Language, has had some 600,000 Korean applicants over the past five years.
kswho@koreatimes.co.kr
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