Film star’s tax scandal officially ended with an apology and massive fine—but the consequences for the entertainment industry may be widespread and painful
The “mystery” of the disappearance of China’s highest-paid actress appears to have been resolved, via a public apology, fines, and a nationwide, extensive investigation into widespread tax evasion in the film sector.
Fan Bingbing, known for star roles in mainland blockbusters such as I am not Madame Bovary, as well as cameos in Hollywood’s X-Men and Iron Man franchises, hadn’t been seen in public since June. Around this time, the actress—who officially made about 44 million USD last year, according to Forbes—was taken into custody amid allegations of tax evasion and corruption.
Overnight, Fan had become the highest-profile victim of China’s recently established liuzhi system, a type of secret detention that replaces a previous, much-feared system of internal Communist Party discipline known as shuanggui. Described as a form of “residential surveillance at a designated location,” liuzhi can be wielded against a much broader range of potential malefactors than corrupt officials, as Fan was likely shocked to discover.
During Golden Week, the 37-year-old actress addressed her 62 million Weibo followers for the first time in over three months, apologizing for hiding her true income through the use of secret “yin yang contracts,” and, naturally, thanking the Party, “without [whose] good policies…there would be no Fan Bingbing.” Fan will, it seems, escape jail, so long as she promptly pays her outstanding taxes and fines, totaling 883 million RMB (128.5 million USD)—while her agent looks set to face trial for, among other things, destroying evidence. (The bombshell news was summarized in a snappy 33-word statement on Xinhua)
News of the fines and Fan’s statement—both of which were discreetly dropped in the middle of a national holiday—prompted a range of reactions, although the topic mysteriously failed to trend on Weibo. Many noted that the punishment hardly seemed to fit the extent of the alleged crimes: “If apologies worked, why do we need the law?” one netizen asked. Others compared Fan to US celebrity Martha Stewart, who received jail time for securities fraud of a lesser value back in 2005.
A more pertinent comparison might be 1980s actress-turned-businesswoman Liu Xiaoqing, who rather foolishly declared herself China’s first female billionaire (in RMB) in 2002. Like Fan, Liu had appeared on the Forbes rich list, with a worth of 70 million USD. This prompted authorities to question why so few of China’s wealthiest paid their supposed 45-percent personal income tax. As with Fan, these accusations prompted the authorities to suddenly enforce the law against celebrities who had seemed to flaunt their wealth and appear above the law or Party.
Unlike Fan, the 51-yer-old Liu Xiaoqing faced a far worse punishment: She was humiliated in state media (who claimed she had a nervous breakdown in jail, became delusional, and began banging her head against the walls), then sent to the notorious Qingcheng prison for failing to pay about a million dollars in taxes. Since Fan’s detention, new rules mean that stars’ salaries are now supposedly to be capped at 40 percent of production costs, or 70 percent of the cast’s total pay. The State Taxation Administration has also offered a three-month amnesty to other (unnamed) errant stars, so long as they pay any overdue or undeclared taxes by December 31.
Experts say that more prosecution and penalties could follow for others, if not for Fan, after the Central Political and Legal Affairs Commission excoriated a toxic materialism and scofflaw attitude among celebrity circles. But Beijing’s disapproving stance against the film industry likely has other motives too, as part of an ongoing effort to sanitize the entertainment industry and rein-in the private sector generally.
It could also promote social stability, in the face of grassroots concerns about China’s ever-widening wealth gap: “The working class earns only a few thousand yuan each month yet pay their taxes duly,” as one Weibo user complained. “Fan earns more than hundreds of millions [of yuan] yet evades her taxes, it’s truly despicable.”
As TWOC has reported previously, China’s entertainment industry is rife with scams and schemes which have damaged both its reputation and output; under the guise of venture capital, tycoons often used the film system as a tax dodge, or a way to siphon cash out of the country by avoiding capital controls, or simply as a way to make a quick return on investment. Such tactics came at the obvious expense of cinematic quality: Despite reports of overall growth, the domestic movie industry has seen a downturn in ticket sales and audience interest in the last year, with several notable flops. These included Legend of Ravaging Dynasties (cost 300 million RMB; box office 381 million) and League of Gods (cost 500 million; box office 283 million), both of which starred none other than Fan Bingbing.
It’s not certain, though, that the Fan Bingbing scandal will deflate the bubble and encourage better production values. As the state replaces private investment, and the increased tax burdens puts independent production houses out of business, there’s likely to be greater ideological control over China’s cinematic output. And don’t forget the US-China trade war—experts that claimed that targeting big names is a means to raise revenue for the state, now facing accusations of mercantilist policies from overseas.
And as for Fan Bingbing? While no official statement has been announced regarding her career, it is likely she will simply lay low for a while, before working her way back onto the red carpet with some celebrity endorsements. Whether she is now politically tainted remains to be seen—but if she needs the extra likes, there’s always live streaming.