China Fines Actress Fan Bingbing, Companies $129 Million in Tax Evasion Case
(Bloomberg) -- China’s decision to slap superstar Fan Bingbing with one of the country’s biggest tax evasion penalties in recent memory sends a reminder that the Communist Party has no plans to loosen its grip on the booming film and television industry.
Fan and companies she’s affiliated with were ordered to pay about 884 million yuan ($129 million) in back taxes and fines, the official Xinhua News Agency reported Wednesday. The 37-year-old actress said she was deeply ashamed of her crimes and apologized to tax authorities and the public.
China’s pursuit of one of its biggest stars serves as a warning to a burgeoning entertainment industry that analysts predict will overtake the U.S. as the world’s biggest movie box office in the coming years. The government investigation came as it heightened scrutiny of what’s already the world’s most regulated major entertainment market, where the Communist Party weighs in on everything from costumes to talent pay.
“Everyone is equal before the law, there is no ‘superstar’ or ‘rich and powerful,’ no one can despise the law and hope to be lucky,” Xinhua said in a separate commentary about the case.
The actress, who has more than 60 million followers on the Twitter-like Weibo, had vanished from public view and on social media since June. That’s after a former broadcaster took to Weibo to publish what he described as contracts Fan and others have used to avoid taxes.
This is also a year in which China’s government has introduced business tax reforms to boost the economy, only to see revenue slump. Premier Li Keqiang last month said tax receipts will see a relatively large decline in the second half.
The scale of the fines and taxes, almost three times her 2017 income as estimated by Forbes magazine, are likely to reverberate, given her popularity and star power within the country’s entertainment community and luxury goods makers.
Fan earned 300 million yuan last year, topping the Forbes China Celebrity List, whose rankings factor in income and popularity. Along with big film and television roles, she is also known as a celebrity endorser of top luxury brands including Cartier, Chopard, Mercedes-Benz, L’Oreal and Louis Vuitton.
Fan had been named a judge at the Cannes film festival and appeared there in May to promote “355” with peers Jessica Chastain, Marion Cotillard, Penélope Cruz and Lupita Nyong’o -- a female spy blockbuster she swiftly dropped out of following the tax allegations.
The Chinese star’s return to Weibo to apologize and vow to “overcome difficulties” to pay the taxes and fines, caps a period in which Fan had not been heard from on social media nor reported seen in public. The absence spurred speculation she was being held by authorities, who made no announcements regarding her status.
Fan’s agent is being held on suspicion of criminal activity and the tax authorities said he obstructed their investigation, Xinhua reported. If the star pays the fines and taxes on time, she will avoid criminal charges, the news agency said, citing the tax authority.
The Party-controlled Chinese Academy of Social Sciences last month released an assessment and ranking of the “social responsibility” exhibited by China’s Top 100 celebrities. Fan, ranked last. Only nine stars “passed” the assessment at all. In recent months, the government has also issued directives to cap celebrities’ pay and top production companies have vowed to resist overcompensating stars.
The star’s tax troubles surfaced earlier this year when Cui Yongyuan, a retired state television news anchor, posted snapshots on Weibo of two contracts that appeared to be for an upcoming Fan film. One indicated a salary of $1.6 million to be reported, while a second document appeared to show actual payment of $7.8 million.
The practice is known in China as "yin and yang" contracts and is used in other industries as well. Cui’s accusation that the contracts were for a Fan film prompted the State Administration of Taxation to begin a probe of her and the entertainment industry.
In June, the Communist Party’s Central Publicity Department and four other government departments issued a directive that compensation to performers must not exceed 40 percent of total production cost. Nor can leading actors be paid more than 70 percent of total cast remuneration. The caps apply to productions including films, TV dramas, variety shows and digital-only series.
Extravagant pay and tax evasion have fueled “money worship” and twisted social values, the directive said. The industry should put “social benefit” first, it said.
©2018 Bloomberg L.P.