Asia Business Channel

Fan Bingbing – Reappears ... Apologizes ... Receives Massive Penalty for Tax Fraud ...

New Page 1

Fan Bingbing, one of China’s most popular female actresses and brand ambassadors, has reappeared in public after a 3-month absence. Fan, had been “missing” from public view since late June, and Chinese netizens assumed that Chinese authorities had detained her over tax evasion.

Fan, is 37-years old and has appeared in international films. She reappeared on social media at the end of September and posted a long apology on her Weibo account, admitted to wrong doing, and praised the Chinese Communist Party and state, saying “without the good policies of the party and the state," she would be nothing.

There are conflicting reports in Chinese media as to what the amount of unpaid taxes and penalties are. One report was that Fan had avoided paying $20 million USD (140 million CNY), while another said she had avoided taxes of $37.8 million USD (255 million CNY). What has been announced is that Fan will be required to pay a total of $128 million USD (880 million CNY) in taxes and penalties.

According to the website Celebrity Net Worth, Fan has a net worth of $100 million USD. Based upon owing the government $128 million, its expected that a significant portion of the fines that she will pay will come from future earnings or from money that the movie star will have to borrow. Kensuke Matsuda, Director at KPMG China. noted in the press that "Under Chinese tax law, intentional evasion faces a penalty of several times the amount dodged," far higher than in other countries.”

Fan herself is no stranger to controversy and at the same time she was being investigated by the Chinese tax authorities, she has also been involved in a lawsuit against Chinese businessman, Guo Wengu. Guo is a Chinese billionaire real estate mogul who is living in self imposed exile in Manhattan. In 2016 he made a video and posted it to YouTube claiming that Bingbing was having an affair with Wang Qishan, the Chinese Vice President and that she had been paid millions of dollars to have sex with him. Fan the hired an international law firm in New York City to sue Guo on grounds of character defamation.

During a live interview with Voice of America, a Mandarin-language, U.S. government funded media outlet, Guo accused high-ranking members of China's Communist Party of corruption. The VOA interview was streamed live and had been planned to run for three hours but was terminated without explanation after just 1:20 minutes once Guo began talking about Wang Qishan, the Chinese Vice President and head of China's internal corruption division.

In the VOA interview, Guo compared the relationship between Chinese business people and politicians to prostitution and he claimed to have evidence of this corruption. After the VOA interview, Guo went on to publish at least two videos online that alleged that Fan Bingbing had been having a long-term affair with Wang in Beijing and that she was receiving financial benefits from having sex with him. Fan denies having any sexual relationship or adulterous affair with Wang, or of being a part of any bribery scheme. Fan has hired an international law firm in New York City to sue Guo on grounds of character defamation and calls Guo's claims "unsupported, wild, and defamatory."

Chinese authorities are using Fan's case to crack down on “Yin-Yang” contracts that many of China’s creative talents use to hide their true income from tax authorities. As an example, a movie star like Fan may receive a “public” contract for $1 million dollars, which is the contract provided to tax authorities. At the same time, she is given a “private” contract, which guarantees the star $2 or 3 million USD instead.

For the upcoming movie “Air Strike” which stars Bruce Willis, Fan reported earnings of just $1.5 million USD (10 million CNY) but actually received $4.5 million USD (30 million CNY).
State-run news agency Xinhua News Agency reported that the contract for Air Strike was one of many contracts that tax authorities had found that verified Fan was paid millions of dollars more than she reported.

Chinese media reported that Fan wouldn’t face criminal charges if she makes the back tax and penalty payments within the period ordered by the government. The government is also expected to let Fan return to the movie industry, and in her Weibo post, Fan shared her desire for a comeback, saying that she will continue to produce new works.

China's creative and entertainment markets have grown massively over the last 10-years and the payments to celebrities and stars have followed. Fan was the country's highest-paid celebrity entertainer in 2017 with an estimated income of $42 million USD, according to domestic media. Based upon Fan’s case, it is expected that the tax authorities will scrutinize the contracts and tax payments for other entertainment and media stars. Several “major” entertainers are likely to come forward in the coming months and ask the tax authorities for permission to “amend” their previously reported incomes and tax payments so that they avoid the heavy penalties that Fan is facing.

Read 51