Taxing time for China’s silver screen stars
Film regulators and tax authorities bring the curtain down on “unreasonable” salaries in massive crackdown on China’s ‘La La Land’
She is adored and admired by millions of Chinese cinemagoers. Fan Bingbing is so big in movieland that when she was embroiled in tax evasion allegations the shockwaves rocked the share prices of major film companies listed in Shenzhen and Shanghai.
The 36-year-old actress has carved out a massive reputation in China, starring in smash hits such as A Battle of Wits, Shaolin and Sacrifice. She even appeared in the 2014 Hollywood blockbuster, X-Men: Days of Future Past.
Last year, she earned a reported 298 million yuan (US$45 million) from movie roles, sponsorship and celebrity endorsements, making her arguably the highest-paid star in the Chinese film industry firmament.
But real life has a habit of overshadowing reel life after Fan became involved in a tax drama earlier this month with well-known television presenter Cui Yongyuan.
The fallout has prompted the country’s tax authorities and film regulators to bring the curtain down on “unreasonable” pay packets, “money worship,” and the “distortion of social values” by “misleading the youth into blindly chasing after stars.”
Late last week, the Central Propaganda Department, the Ministry of Culture and Tourism, the State Administration of Taxation, the State Administration of Radio and Television, and the National Film Bureau issued a statement, with concrete proposals, to Xinhua.
“It reminded the industry about prioritizing social benefits rather than box office returns,” the official Chinese news agency stated.
New rules will limit the fees that stars can be paid for onscreen work to 40% of total production costs, and stipulate that no single actor should command more than 70% of the total casting bill, China Daily reported.
“Aside from the effort to fight unhealthy competition of inflating salaries to recruit celebrities, the authorities also will step up punishment against tax cheating and evasion,” the state-run newspaper said.
This latest move followed allegations on the Chinese microblogging portal Weibo, which were later withdrawn by Cui, that showed two movie contracts claiming to belong to Fan. Both documents were for the same film and although they were badly blurred, they appeared to show that the salary figures were different.
This immediately triggered online speculation that Fan was using separate agreements to avoid tax liabilities by disguising her income, a claim she has vehemently denied. A day later, her studio called the post slander and threatened a defamation suit against anyone who made similar allegations.
“Cui’s decision to expose confidential documents and publicly insulting Ms. Fan not only breaks business rules but infringes on Fan’s legal rights,” the studio said in a statement published in the Chinese media.
Still, the controversy would have ended up on the cutting room floor until the announcement last month by the State Administration of Taxation ordering an investigation into “tax evasion” in the entertainment industry, the state-run CCTV stated.
What followed became a social media storm. Even shares in movie studios, such as Huayi Brothers Media, which is making Fan’s latest film Cell Phone 2, were hit, as well as 20 movie theater chains and other related showbiz companies on the Shenzhen and Shanghai exchanges.
Again, while it is crucial to reiterate that Fan and her movie studio have denied all allegations, what started as an online squabble has morphed into a national debate as Beijing continues its wider tax evasion crackdown.
Last year, the Chinese government ordered an extensive overhaul of the tax system as part of President Xi Jinping’s ongoing war against corruption. Tighter controls on personal and corporate financial accounts were brought in to close loopholes.
“Such a regulation will improve monitoring of financial accounts in different sectors and help discover clues to tax evasion through changes in those accounts,” Cai Chang, the head of Central University of Finance and Economics’ taxation department in Beijing, told the South China Morning Post at the time.
“The government is still worried about tax evasion,” Cai added.
With the glitzy world of China’s ‘La La Land’ being brought into sharp focus, it will be interesting to see if this script has a happy ending.