Spotlight on tax evasion in Chinese show business

China actress Fan Bingbing is at the centre of an online storm over her alleged inking of two contracts in a bid to avoid paying taxes.
China actress Fan Bingbing is at the centre of an online storm over her alleged inking of two contracts in a bid to avoid paying taxes.PHOTO: AGENCE FRANCE-PRESSE

SHANGHAI • These could be taxing times for China's A-listers in the entertainment industry.

While actress Fan Bingbing is already at the centre of an online storm over her alleged inking of two contracts in a bid to avoid paying taxes, Chinese news media reported that suspicion has also fallen on other celebrities.

Industry sources said the two-contract practice is not limited only to show business in China, with the contract bearing a smaller sum being used for tax reporting.

On Sunday, People's Daily posted that Fan would "face investigation... after an online tip-off accused the celebrity of tax evasion by signing different contracts to gain as much as 60 million yuan (S$12.5 million) for a four-day movie shooting".

Last week, TV presenter Cui Yongyuan sparked an outcry when he posted the alleged contracts. One document mentioned that she would earn 10 million yuan, while the other indicated a 50-million-yuan payment.

While Fan's supporters have criticised Cui for unprofessional conduct and her studio has hired a law firm to evaluate her options after noting that her legal rights have been breached, others feel that the debate over A-listers' rewards - and how these can be regulated - could also help bring about clarity and change.

"The online controversy focuses on actors' excessive salaries, but it is only the tip of the iceberg for the industry," Mr Zhang Peng, a film researcher at Nanjing University's National Research Centre of Cultural Industries, told the Global Times.

"While China has issued several statements seeking to regulate the entertainment industry over the years, it has failed to curb the phenomenon."

Last year, five government agencies issued directives urging media firms to focus on culture rather than celebrity, while the China Alliance of Radio Film and Television issued guidelines that sought to curb performers' pay to 40 per cent of a production's budget.

The remuneration for high-fliers can be great.

Forbes, for example, listed Fan as the world's fifth-highest-paid actress in 2016, with estimated earnings of US$17 million (S$23 million).

Reuters reported that the last time a high-profile artist was entangled in a tax investigation was in 2002, when actress Liu Xiaoqing was imprisoned for a year for tax evasion.

Fan is unlikely to face criminal charges - as long as she pays taxes owed and late fees. This is the opinion of Beijing-based lawyer Wang Fu, reported the Global Times.

Still, investors have been spooked by the turn of events. Yesterday, they acted to shield themselves from any fallout from the current probe, with an index tracking major media firms in China dipping 1.3 per cent to a near-four-year low.

A version of this article appeared in the print edition of The Straits Times on June 05, 2018, with the headline 'Spotlight on tax evasion in Chinese show business'. Print Edition | Subscribe