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Politics

Beijing targets superstars following Fan Bingbing's epic tax fine

Analysts say China is gathering tax revenues to support a prolonged trade war

Fan Bingbing is 'not the only one being targeted', the Communist Party's Central Political and Legal Affairs Commission warned in a commentary.    © Reuters

HONG KONG -- More Chinese superstars could fall into the net of Beijing's escalating crackdown on "the heartless rich," following Fan Bingbing's $130 million bill for tax evasion.

Fan, one of China's highest paid actresses, is "not the only one being targeted," the Communist Party's Central Political and Legal Affairs Commission warned in a commentary on Thursday, as it criticized the widespread vices of money worship and disregard of the law in the entertainment industry.

The high-profile crackdown on the super rich came amid rising public anger over inequality and spreading concerns about the trade war between China and the U.S., prompting Beijing to take tough action to maintain stability, analysts say.

Fan, who has appeared in the "X-Men" and "Iron Man" film franchises, on Wednesday apologized for hiding her income through a secretive contract, after disappearing from public view for three months. But the 37-year-old movie star escaped a jail sentence.

Tax authorities said in an article on Xinhua, the news agency that is the Communist Party's mouthpiece, that it had started a campaign to readjust the film and TV industry and will exempt individuals and companies from additional fines and penalties if they pay back their overdue taxes by December.

This deals another blow to the industry, with actors and actresses already forced to take a big pay cut since June. The Chinese authorities ordered on-screen performers' salaries should be capped at 40% of the total production costs and that leading actors should not receive more than 70% of the total wages of the cast.

While film and pop stars have always enjoyed big paychecks, Beijing's decision to tackle the issue now -- not earlier -- shows the mounting social discontent over inequality and rising concerns over the country's economic outlook, said Willy Lam, adjunct professor at the Chinese University of Hong Kong's Centre for China Studies.

"Xi is targeting super rich people, whether they are movie stars or tycoons," he said, as their lavish lifestyle has "raised the anger of low-class people."

Chinese President Xi Jinping.   © Reuters

Fan earned about 300 million yuan ($44 million) last year, topping the list of Forbes' China celebrity rich list. Ordinary Chinese, however, face an uncertain job outlook and rising living costs amid the trade war between China and the U.S.

In fact, China's wealth gap is widening. One indication is the Gini coefficient, a statistical measure of wealth and income distribution. It had improved since 2008, but worsened over the past two years.

The crackdown can also be seen as a move forward in Beijing's ongoing efforts to expand state influence over the private sector, Lam said.

"A lot of movie studios are held by private tycoons," Lam said. "It is an open secret within the industry that the movie industry has been used for money laundering and tax evasion."

As a result, the "bubbles in China's booming film industry will burst" as businesses reduce investments in productions due to tighter political and financial controls, according to Wu Qiang, a former Tsinghua University political science professor.

China has grown to be the world's second largest film market, with box office revenue rising 13.45% to 55.9 billion yuan last year, according to Xinhua.

"The film and television industry will no longer be a tax haven," Wu said. He expected that the state-owned players will seize the opportunity to further expand their presence in the country's creative industry, leading to tighter ideological controls.

Wu believed the sports industry, where athletes also get excessive pay, could be the next target of Beijing's tax collection campaign.

In fact, production of many films, TV shows and online drama series have been suspended over the past few months, an owner of a film production house in Beijing, who preferred not to be named, told Nikkei.

The person said smaller workshops had been hit the hardest, with some seeing their tax bill increase by up to four times under the government's new tax standards. Such an increase in financial burden would put many companies out of business, the person added.

But an industry rectification is not Beijing's only intention, according to Johnny Lau Yui-siu, a Hong Kong-based independent political commentator. It needs the tax revenues for a wider purpose, he said.

"Beijing needs to use every means to raise money in preparation for a long-running trade war with U.S.," Lau said, as he estimated billions of dollars could be extracted from celebrities like Fan.

"The show business is definitely a big source for the funds," he said.

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