China's film & TV industry ordered to pay tax dues for past 3 years


People line up to pay taxes in a local tax bureau. Photo: VCG

China has launched a campaign to regulate the payment of taxes within the film and TV industry in the wake of the yin and yang contract scandal involving the country's most successful actress Fan Bingbing.

In a recent notice, the State Administration of Taxation (SAT), China's top tax authority, ordered local tax bureaus to inform film and TV companies and high-income individuals to conduct self-examination and self-correction for their own tax status in the past three years and pay the due taxes by the end of this year.

"Those who carefully check and correct their own tax payments and take the initiative to pay taxes before the end of December 2018 are exempt from administrative punishment and will not be fined," said the notice.

"Taxpayers who have self-corrected after being reminded by local tax bureaus may be given lighter or less administrative punishment in accordance to the law; if the violations are minor, they may be exempted from administrative punishment," it added.

The notice warned that authorities would carry out "inspections on film and TV companies and individuals who refused to correct themselves, and deal with them seriously according to the law starting from next March."

Rising anxiety

After the notice was released, it immediately became the focus of discussion.

Worried that they may not have enough money to pay the past three years' taxes, which could force them to suspend production projects, lay off employees, or even file for bankruptcy, some film and TV companies have raised questions over SAT's tax collection method.

In an interview with China's respected financial magazine Caixin, an anonymous investor said, "We are shocked to be informed that we would have to repay the tax, which means that the preferential tax policies rolled out by the local government are illegal."

According to Caixin, the policies, in essence, are unapproved measures took by local governments to attract investment. They are illegal according to the law.

"In China, only governments in national autonomous regions have the right to adopt preferential tax policies," the magazine noted. "As for other areas, such measures should be reviewed and approved by the State Council, China's cabinet, before coming into force."

Tax scandal

In May, Cui Yongyuan, a former host of the state broadcaster China Central Television (CCTV), took to China's Twitter-like Weibo, alleging that Fan signed yin yang contracts to mislead tax authorities about how much she had been paid for her role in the film Air Strike.

Though denying any wrongdoings, Fan then disappeared from the public view after the SAT announced a tax investigation in June.

In early October, China's tax authorities announced that they found that Fan owed over 255 million yuan in unpaid taxes, of which 200 million yuan was regarded as tax evasion.

She and her companies were ordered to pay the unpaid taxes, and fined about 600 million yuan.

In October, the state-run Securities Daily reported that over 100 film and TV companies in Khorgas, northwest China's Xinjiang Uygur Autonomous Region, announced to shut down their operations.

Among those fleeing the remote city were many well-known celebrities like Feng Xiaogang, Zhao Wenzhuo, and Xu Jinglei, who are legal persons or stakeholders of the film production companies.

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