Fan Bingbing Tax Evasion Probe Sparks Film Industry Crisis in China

Fan Bingbing
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I Am Not Madame Bovary, Cell Phone

Shares in China's biggest film studios plunged Monday after Chinese regulators announced that they were investigating a dubious contracting mechanism for hiding the true pay of high-profile stars.

Allegations that one of China's biggest movie stars used tricky contracting to evade taxes sparked a moment of crisis Monday throughout the country's film industry.

The controversy began last week when Chinese television presenter Cui Yongyuan took a shot at actress Fan Bingbing, saying her income was so exorbitant it was hurting the Chinese film industry. Fan, who is set to co-star in Jessica Chastain’s upcoming female action film 355, has been China's highest-paid actress for the past four years according to Forbes. The actress had gained attention earlier in the week amid reports that she paid over $30 million (RMB 200 million) for a duplex penthouse apartment in Shanghai.

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. In 2017, government regulators intervened in the market by ordering production companies to limit actors' paychecks to no more than 40 percent of a film's total production budget. It also added that leading actors' salaries cannot exceed 70 percent of the total payments to the film's full cast.

Cui dramatically escalated his attack on Fan later in the week by leaking two film partially redacted contracts allegedly belonging to the actress. The first indicated that she had been paid $1.56 million (RMB10 million) for four days work on the upcoming film Unbreakable Spirit, directed by Xiao Feng and co-starring Bruce Willis. The second suggested that she had been paid an additional $7.8 million (RMB 50 million) for the same work. Cui's leaks suggested that the dual contracting was provided so that Fan could submit only the first to the tax authorities while hiding the full extent of her hefty compensation.

Cui's allegations exploded across Chinese social media over the weekend, with the hashtag "Cui Yongyuan bombarding Fan Bingbing" viewed over 38 million times on Weibo as of Sunday afternoon before it was removed by censors, according to the state-backed Global Times.

Fan's personal film studio, Fan's Workshop, has issued a statement saying that Cui's posts amount to personal insults and an infringement on her rights. The statement added that she had retained the services of a prominent Beijing law firm.

Cui later stated that the second contract was, in fact, not Fan's; but the damage had already been done. 

Chinese authorities responded with actions suggesting that they are taking the issue very seriously. The State Administration of Taxation ordered local tax bureaus to investigate and pursue action against the double-contracting trick, so-called yin-yang contracts, in the film business. Shortly after, the regional tax office in Wuxi, in China's Jiangsu Province, where Fan's company is based, announced that it was investigating the studio, along with other production companies. 

Concerns that ying-yang contracts could be a common practice in the industry sparked a sell-off of shares at several leading Chinese film and television companies on Monday. Leading studio Huayi Brothers Media saw its shares fall by the 10 percent daily limit to a five-year low of 7.36 yuan on the Shenzhen exchange. Shares of Zhejiang Talent Television and Film, in which Fan owns a 1.6 percent stake as the 10th-largest shareholder, also plunged 10 percent to 14.85 yuan in Shenzhen — the company's lowest close since March 2015, according to the South China Morning Post. Other listed companies seemingly unattached to Fan were similarly hard-hit: Jack Ma's Alibaba Pictures Group slipped 5.8 percent in Hong Kong, and TV drama producer Wuhan DDMS Culture slumped 9.8 percent on the Shanghai exchange.

Chinese Internet commentators have seized on Fan's other lavish contractual requirements made public in Cui's leaks. They included the actress having full script approval on the film, the use of two limousines, a full-time voice coach, a makeup artist to be paid a full month's wages of $12,500 (RMB 80,000) for her four days on set, and a $235 (RMB 1,500) daily food allowance.

Fan, now 36, rose to fame in the late 1990s following a breakout role in the TV drama My Fair Princess. Her first big movie role was a starring turn in Feng Xiaogang's 2003 film Cell Phone, which became the highest-grossing title of the year. She has also appeared in minor roles in Hollywood tentpoles such as Iron Man 3 and X-Men: Days of Future Past. A global fashion icon and frequent Cannes Film Festival attendee, she is one of the celebrity faces of Chopard and also endorses Champagne house Moet & Chandon.

Unbreakable Spirit is scheduled for release in August.