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China Cracks Down on Entertainment Industry Taxes After Fan Bingbing Scandal

China’s entertainment companies and top-earning celebrities have been warned to re-examine their taxes dating back to 2016 in light of the Fan Bingbing tax evasion scandal.

The State Administration of Taxation said in a statement released on Monday that beginning on Oct. 10, provincial tax authorities will inform local film and television production companies, talent management agencies, performance companies, studios of individual celebrities, as well as relevant companies and high-earning film and television industry practitioners about the re-examination of their tax returns submitted since 2016. Companies and related industry workers who discover and pay their unpaid taxes upon self-conducted inquiry of their previous tax returns by Dec. 31 will not be penalized, the statement said.

From January to the end of February 2019, tax authorities will target certain companies and industry workers to “further self-correct” their taxes based on their self-conducted re-examination results. Those who are warned to self-correct their taxes at this stage will be penalized, but the level of punishment will vary depending on the situation. Heavy penalties will be applied to those who fail to comply between March and June next year.

Authorities will review the current taxation policies applied on film and television industries and set up a new, effective system by the end of July 2019.

It emerged last week that Fan, China’s most famous actress who disappeared for 123 days when she was reportedly arrested, was accused of tax evasion after splitting contracts for her appearance in war epic “Unbreakable Spirit.” She was ordered to pay a total of $129 million (RMB880 million) in unpaid taxes, late payments, and penalties. The State Administration of Taxation also announced that five officials from the regional taxation office of Wuxi of the Jiangsu province, where Fan’s company is based, have been either fired or demoted.

The share price of Huayi Brothers, which produces “Cell Phone 2” and acquired the local rights to all-female action drama “355,” both starring Fan, plunged to a new low at $0.73 (RMB5.02) per share on the first trading day after China’s national holiday week, down more than 50% from its peak at $1.51 (RMB10.42) at the beginning of 2018.

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