22 July 2019
Fan Bingbing is being investigated for alleged tax evasion in connection with her income from her latest movie Cell Phone 2. Photo: Sina
Fan Bingbing is being investigated for alleged tax evasion in connection with her income from her latest movie Cell Phone 2. Photo: Sina

Chinese actress Fan Bingbing mired in tax evasion scandal

Fan Bingbing is said to have received up to 60 million yuan (US$9.36 million) for Cell Phone 2, a movie directed by Feng Xiaogang, but she allegedly used some tricks to evade paying taxes. The taxman has vowed to look into the case.

It was Cui Yongyuan, a well-known TV presenter and producer, who made the tip-off. He has several very popular talk shows, including Tell It Like It Is and Talk with Xiao Cui.

Cui left CCTV in 2013 and now teaches at the Communication University of China. He has built a strong following on Weibo, the Chinese equivalent of Twitter, by discussing controversial topics such as the failure of many makers of genetically modified food to come up with proper product labels.

Last month, Cui alleged on a Weibo post that Fan had been offered 10 million yuan in one movie contract and a separate 50 million yuan to be paid through other channels.

The State Administration of Taxation then pledged to conduct a thorough tax review of the incomes of high-flying actors and actresses.

Fan’s studio issued a statement on May 29, saying Cui’s move to expose confidential documents and publicly insult Fan “not only breaks business rules but infringes on Fan’s legal rights”.

The statement, however, did not respond directly to the tax evasion accusations.

The saga has shed light on rampant tax dodging in China’s entertainment industry.

Currently, Chinese have to pay an individual tax rate of 45 percent if they earn more than 80,000 yuan per month.

Given the high tax rate, exploiting the grey areas to evade taxes is commonplace.

For instance, some Chinese celebrities obtain Hong Kong residency first and then act as an endorser for the Greater China region if they appear in a movie or television drama.

As such, a part of their income is paid as an endorsement fee for the Hong Kong market, where the highest personal tax rate is 15 percent.

Not only will they pay less tax, there is also the added advantage of being paid in foreign exchange, which they can invest in overseas assets. Others open movie studios or offices to achieve something similar.

China’s laws provide harsh penalties for tax evasion, ranging from fines to a jail term of up to seven years.

Liu Xiaoqing, one of the country’s most famous actresses, was jailed for evading 14 million yuan of tax payment in 2002. She was granted bail after spending 422 days in prison.

This article appeared in the Hong Kong Economic Journal on June 4

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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