Film, television companies flee Khorgas amid campaign against tax evasion

A China-Kazakhstan border checkpoint in Khorgas, Xinjiang Uygur Autonomous Region. Photo: VCG

Over 100 film and television companies in Khorgas, northwest China's Xinjiang Uygur Autonomous Region, have recently shut down their operations amid a campaign to regulate tax payment in the film industry, the state-run Securities Daily reported.

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

On August 27 alone, there were as many as 25 such closure notifications, local newspaper the Yili Daily reported.

According to China's company law, a company must complete a clearing process and publish a newspaper announcement before it can file for cancellation of registration.

Khorgas: Special economic zone or tax haven?

Located in Ili Kazakh Autonomous Prefecture of Xinjiang, Khorgos is near the border with Kazakhstan, serving as a link between China and Central Asia.

The city, which boasts about 85,000 people, was designated as a Special Economic Zone in 2010.

Since then, Beijing has rolled out a series of preferential tax policies for companies in the area, such as a five-year company tax holiday in 2011, and a further five-year 50 percent discount in 2012.

The incentives were aimed at boosting the local economy.

The preferential tax policies attracted a large number of companies and talents to the city, including over 1,600 media companies.

However, up to 98 percent of companies that registered in Khorgas don't have physical presence in the city, according to a story published by Shanghai-based news website thepaper.cn.

Yin yang contract scandal

On May, Cui Yongyuan, a former host on the state broadcaster China Central Television (CCTV), took to China's Twitter-like Weibo, alleging that Fan Bingbing, the country's highest-paid actress, signed yin yang contracts to mislead the 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 State Administration of Taxation 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.

"I completely accept the decision by tax authorities," Fan wrote in an apology letter which was published on her official Weibo account. "I will try my best to overcome all difficulties and raise funds to pay back the taxes and fines."

"My success owes to the support from my country and the people. Without the favorable polices of the Communist Party of China (CPC) and the state, without the love and care of the people, there would have been no Fan Bingbing," she concluded.

Tightened crackdown on tax evasion

Fan's case has opened the door to a broader crackdown on stars' tax evasion, which is "common" in China's entertainment circle.

Those who make remedial payments to taxation authorities before December 31 will be exempt from administrative punishment and penalties, the top tax regulator said in a recent notice.

The taxation authorities will move in at the beginning of 2019, and those who still refuse to take action will be severely punished, it added.


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