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Chinese stars hit with $1.62bn in tax crackdown

Chinese stars hit with $1.62bn in tax crackdown
January 22, 2019
BEIJING/SHANGHAI (Reuters) - Chinese authorities have collected more than 11 billion yuan (1.25 billion pounds) in unpaid taxes from Chinese stars and entertainment companies since they hit the industry with a crackdown, state media Xinhua reported on Tuesday. Xinhua, citing the national tax bureau and content watchdog, said the campaign, which began in October, had ended and companies and workers had been ordered to correct their tax records. The most famous star to get caught up in the campaign was actress Fan Bingbing who has 62 million online followers. She was ordered to pay about $129 million in overdue taxes and fines in October, after a four-month disappearance from the public eye, Xihua reported earlier. Fan issued an apology after being ordered to pay up, saying she accepted the decision, would overcome “all difficulties” to pay the penalties and would step up supervision of her companies. Industry insiders have lamented that a “cold winter” has descended on the business since authorities launched the checks, with film projects stalling and investors selling off related company shares.
Huayi Brothers Media Corp, a company linked to Fan Bingbing, has seen its share price halved since last year, while movie box office revenue growth in the world’s second-largest movie market after the United States, slowed last year. Authorities said the industry should set its mind at rest and focus on work, but added that it would continue to target companies and individuals deemed highly exposed to tax-related risks. Industry workers should “practise socialist core values ... and strive to be entertainment workers with belief, empathy and sense of responsibility in the new era”, authorities said, according to Xinhua.

Punishment for a high-profile, A-list star such as Fan was taken as a stark warning to others in the industry. One of Chinese Communist Party’s security agencies even published an article titled, “This absolutely is not simply aimed at Fan Bingbing alone.”

Since June, the Chinese regime has been investigating tax evasion in the film and television industry, following reports that Fan and other famous actors have been signing so-called “yin-yang” contracts, one of which sets out the real terms, while a second—with a lower figure cited—is meant for tax officials. 

Hong Kong newspaper Ming Pao also noted that the Chinese Communist Party is likely concerned that Fan’s case of tax evasion will negatively impact the public’s confidence in China’s tax system, or even prompt public anger at celebrities being able to get away with breaking the law—hence, the decision to crack down on tax evasion in the entertainment industry.