Chinese film industry coughs up US$1.7 billion in back taxes after Fan Bingbing scandal triggers crackdown

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China’s domestic film industry has paid more than 11.5 billion yuan (US$1.69 billion) in back taxes since authorities cracked down on tax evasion in the wake of the Fan Bingbing scandal, state-run Xinhua news agency reported on Tuesday.

 

Authorities were demanding payment of 11.7 billion yuan in taxes from production studios as 2018 ended, the report said.

The mass tax collection was in response to a government demand in October that all film industry members re-evaluate their tax situations in the spirit of “self-examination and self-correctionâ€.

The directive came after authorities ordered Fan – one of the world’s highest-paid actresses – to pay fines and back taxes of nearly 884 million yuan after she had been held in secret detention for three months and found guilty of evasion.

The State Administration of Taxation and the National Radio, Television and Film Administration said the “supervision and correction work†had achieved good results, Xinhua reported.

A Chinese director who requested anonymity said she had been only moderately affected by the new tax regulations as the production company she worked for was relatively small.

“For some of my friends in the industry, its effect is not that big either,†she said.

In May, Fan – who has topped the list of highest-paid celebrities on the Forbes China Celebrity 100 list for four straight years – was revealed to have evaded tax on 20 million yuan of income through her use of fraudulent contracts that underreported her pay.

When news of her evasion emerged, the scandal triggered a government investigation into tax dodging and “immorality†in China’s lucrative entertainment industry, where the use of dual contracts was once rampant.

Since then, Beijing has noticeably tightened the industry’s tax regulations.

Entertainment companies that registered in the tax haven of Khorgos – a city in northwest China’s Xinjiang province that offered new arrivals a 0 per cent corporate income tax rate for five years – have also been forced to relocate en masse since a government inquiry began there in January.

Government bodies have also issued forceful statements against celebrity “money worship†and capped actors’ salaries at 40 per cent of total production costs.

Liu Jianwen, president of the Institute of Finance and Taxation Research at the China Law Society, was quoted by Xinhua as saying the new taxation system promoted the healthy development and prosperity of the film and television industry.

Yan Shaofei, secretary of the China Film Association, was also quoted as saying the new regulations tackled problems within the industry.

Film industry members who did not cooperate with the “self-correction†drive would receive warnings from the authorities, a person familiar with tax regulations was quoted as saying.

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