Say goodbye to Huallywood? The star tax probe clouding a Chinese city’s movie-making dreams
Claims of tax evasion by highly paid performers could be a major plot twist in debt-ridden Wuxi, a city building its hopes of a better future on film and TV production
These are taxing times for inland revenue officials in the eastern Chinese city of Wuxi, where allegations of tax evasion are creating a real-life drama in China’s version of Hollywood.
In less than a decade, a massive movie-making machine – a complex of hundreds of production houses dubbed “Huallywood” – has risen from the ruins of a steelworks to become the country’s cinematic centre of gravity.
Although the entertainment industry is not a huge contributor to Wuxi’s economy, the city hopes it will become a leading source of revenue.
But now that is all under threat, with officials under pressure from the public and the central government to investigate claims that some of the biggest names in show business are colluding with film studios to under-report tax via a system of “yin-yang” contracts.
The practice involves the celebrity signing two contracts: one stating the real amount the signatory will receive and another showing a much lower payment to be submitted to the tax authorities.
The contracts are illegal but reportedly common in everything from the property sector to soccer clubs. The authorities have launched various campaigns over the years to eradicate the practice but have been hampered by inadequate accounting systems and soft penalties.