China Cracks Down on Celebrity Pay, Citing Tax Evasion and "Money Worship"

TPG/Getty Images
Fan Bingbing

The move is viewed as a response to the recent controversy surrounding actress Fan Bingbing and her alleged use of fraudulent contracting to evade taxes.

China's media regulators are cracking down on the high pay enjoyed by movie stars, while also taking action to prevent tax evasion in the country's film industry, state-backed news sources reported late Wednesday.

The move was widely viewed as a response to the recent controversy surrounding actress Fan Bingbing and her alleged use of fraudulent contracting to hide her true income.

The total pay for a film's cast should be capped at 40 percent of the total production budget, according to a joint directive signed by five government regulatory bodies, including the Propaganda Department and other film and tax authorities. Payments to stars also should not exceed 70 percent of the total wages paid to the cast, the notice said.

Celebrity pay is a sensitive issue in the Chinese industry, where surging ticket sales have often resulted in bidding wars over the limited number of top actors who are believed to guarantee box-office results. The "new" guidelines are the same as a set issued by the China Alliance of Radio, Film and Television last year. But the greater authority of the government bodies behind Wednesday's decree could mean that enforcement will be taken more seriously.

The statement added that illegal payment practices, such as the underreporting of star pay for the purpose of tax evasion, was inflating production costs and damaging the Chinese film industry.

Last month, well-known Chinese TV host Cui Yongyuan publicly posted a pair of film contracts thought to belong to Fan Bingbing, China's highest-paid actress. The contracts, one for just $1.6 million and the other for $7.8 million, were meant to lay bare the practice of "yin-yang" contracting, an allegedly widely used system that enables stars to report only the smaller sum to tax authorities.

The document also chastised the entertainment industry for encouraging the "blind chasing of stars" and the "growing tendency toward money worship" among Chinese youth, as well as the "the distortion of social values."

It added that the film industry's top priority should be "social benefits," while the single-minded pursuit of box-office returns and online clicks should be "firmly opposed."

The state directive appears to be a clear signal that the authorities mean to take the issue of celebrity pay seriously. But many within the Chinese industry are still bracing to see whether there will be more severe repercussions from Cui's public revelations.

Fan's personal film studio issued a statement in the immediate aftermath denying all wrongdoing and saying that Cui's social media posts amounted to personal insults and an infringement on her rights. Meanwhile, the tax authorities in Jiangsu province, where her company is based, said that they are investigating tax evasion by "certain film and television professionals as alleged in online discussions.”