Fan Bingbing’s punishment serves as a chilling deterrent for others
The harsh financial penalties imposed on the top mainland actress for tax evasion assures the public that there is not one rule for the rich and famous, and another for the rest
Many entertainment industry personalities and agents have good reason to reflect deeply on the harsh financial penalties imposed on top-earning mainland actress Fan Bingbing over tax evasion. After all, she was far from the only one to have used so-called yin-yang contracts for her acting engagements – one setting out the real agreed payment terms and a second showing a lower figure for the authorities. It has been a common tax dodge. But this did not spare her severe punishment as an example to others, or “killing the chicken to scare the monkey”, to quote the Chinese idiom.
After disappearing from public view for more than three months during an investigation, she has emerged from a form of secret residential detention with a promise to pay a staggering bill of nearly 884 million yuan (US$129 million) for unpaid taxes and fines. As a tax-evasion first offender, she is fortunate that if she keeps a promise to pay up promptly she will not face criminal charges and the prospect of jail. Nonetheless the authorities have made her pay a heavy personal price to achieve a chilling deterrent effect on others.
Fan Bingbing tax scandal brings China’s film industry to a halt
It is not that long ago, when China was promoting culture as an instrument of soft power, that Fan and many other stars were considered to project a positive image. What is to become of her now? Hopefully, a precedent is to be found in the case of an equally famous entertainer who became entangled in a tax probe 16 years ago. Liu Xiaoqing, a big-name actress and savvy businesswoman, was jailed for a year. She emerged to reclaim her superstar status and continue her career. In a contrite public apology posted on Weibo, where she has 62 million followers, Fan spoke of her shame. We trust she can put a difficult time behind her and find her feet again as a very good actress.
The case raises the wider issue of the complex and comparatively onerous mainland tax system. The government is looking into tax reform but until meaningful changes are effected everyone must abide by the law as it stands. Fan may have deserved the punishment, but the deterrent effect may fall indiscriminately. The question is how to avoid collateral damage to the entertainment and cultural industries in China. This could affect the growing number of Hong Kong artists who are going north to explore countless opportunities at the provincial and municipal level. One answer to the question is tax reform to reduce the incentive for risky minimisation.
The warning to other celebrities implicit in Fan’s punishment has been amplified in a crackdown by the tax authorities, who say individuals and companies who declare and pay back taxes by the end of the year will escape penalties. Most important is that it amounts to a credible assurance to the public that there is not one rule for the rich and famous, and another for the rest.
