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 contracts allegedly signed by the actress. The first indicated that she had been paid $1.56 million (RMB10 million) for four days work on the upcoming Huayi Brothers film Cellphone 2, directed by Feng Xiaogang.
The second suggested that she had been paid an additional $7.8 million (RMB 50 million) for the same work. Cui claimed 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.
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.
But Chinese authorities responded with actions suggesting that they are taking the allegations 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.
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.
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’s 2003 film Cell Phone, which became the highest-grossing title of the year.
Huayi Brothers Media’s Cell Phone 2 is scheduled for a mid-2019 release.