Exclusive | Chinese authorities crack down on tax dodges, illegal capital remittances by celebrities

The Chinese authorities have begun a coordinated crackdown on tax evasion and offshore currency transfers by some of the country’s highest-paid celebrities, in a move to tamp public anger over a yawning income gap.

The joint investigation involves the nation’s tax bureau, the foreign-exchange watchdog, financial crime investigators and regulators of the publishing, broadcasting and sports bureaus, according to several sources familiar with the matter. In their cross hairs are movie actors and actresses, models, television personalities as well as sports stars, the sources said, declining to be identified.

A task force has been assembled, headed by a vice-ministerial level police official and an expert in the investigation of commercial crimes and money laundering, the sources said.

The probes culminated from several weeks of intense public scrutiny and outcry stirred up by popular TV host Cui Yongyuan, who blew the whistle in June on a prevalent practice in China’s entertainment circles to help highly paid celebrities evade tax: dual accords known as “yin-yang contracts” that split remuneration agreements into a copy for tax officials and a private copy for the actor.

“The major purpose of the campaign is to address social inequity” and what appears to be a lack of fairness in society, said Sun Xin, a lecturer in Chinese and East Asian Business at the King’s College in London. “It is also in line with China’s plan to tighten up tax collections in recent years, mainly aimed at clamping down on tax evasion by mid-size and small enterprises.”

A lot is at stake in the campaign. Box office revenue has soared in China along with the nation’s rapidly expanding economy, as more people had disposable income to spend on entertainment. Revenue generated by China’s films, radio and TV shows soared 13 per cent to a combined 3.1 trillion yuan (US$448 billion) in 2016, according to official data, turning many of the highest-paid entertainers into multimillionaires.