China’s highly paid entertainers to face heavy taxes, says media

After an investigation of tax evasion launched against Fan Bingbing, China’s highest-paid actress who was at the center of a controversy, it was recently reported by the Chinese media the authorities are set to impose hefty taxes on top earners in the lucrative show biz, risking to blight the country’s burgeoning film industry.

According to multiple industry media sources, the State Administration of Taxation would begin to collect a 42 percent individual income tax rate from high-profile entertainers with the earliest starting time being August. The current tax rate commonly applicable to this group is merely 6.8 percent.

Industry insiders argued that it is the film industry that will bear the brunt of the new taxation decision. An executive surnamed Zhang with a film producer said that the news already dealt a blow to the industry, with over 30 TV series and 40 films suspending production.

Zhang explained that producing companies would have to shoulder the tax burden because normally famous entertainers would ask for after-tax remuneration.

“For example, if Donnie Yen (an action movie star) asked for 100 million yuan, we would pay him the fee and an extra 10 million yuan for paying his income tax, but now, the tax will surge to 42 million yuan,” he said, noting if this was the case, no one would continue to invest money into the productions.

The controversy started two months ago when former TV anchorman Cui Yongyuan accused Fan Bingbing of demanding exorbitantly high pay and purposely dodging tax through fraudulent Yin-Yang contracts.

The so-called Yin-Yang contracts have long been castigated in China’s show biz circle where A-list performers would charge sky-high prices because it seems they can guarantee good box office returns.

Cui showed two partially redacted contracts, implying the one with 50 million yuan was real, which indicated the actual compensation for Fan’s acting work, while the other one with 10 million yuan was fake, only meant for the famous actress to file to the tax authorities.

TMTpost, a business & technology news portal reported that although the official website of the State Administration of Taxation had not yet released relevant information, the reports on new taxation appear to be true, based on interviews of multiple film producers.  

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