Chinese Celebrities Cheat and Evade Taxes (Essay Sample)

Assignment: Chinese celebrities cheat and evade taxes.
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Chinese celebrities cheat and evade taxes.
1 Tax evasion by "Yin-Yang contract."
Some Chinese movie stars, singers and other celebrities hide their earnings from the tax authorities by showing false paperwork. It is widespread in mainland China and Hong Kong, especially when top tier actors are concerned. The yin-yang contract is the practice of Chinese celebrities submitting a copy of their contract with a reduced salary figure to the tax authorities—this type of tax evasion results in huge financial losses for the government. China's tax authorities have recently become stricter, fining a group of celebrities who allegedly used yin-yang contracts. Chinese actress and singer Fan Bingbing, who also has an extensive list of endorsement deals, including L'Oréal Paris, De Beers and Montblanc, had been a ubiquitous presence in Chinese state media coverage. In June, she vanished from public view after the state-run newspaper Securities Daily reported that the government had launched a probe into whether Fan and other actors were evading taxes by signing secret agreements with producers and only reporting their income from smaller official contracts (Lau, 2021). Since then, the state has waged a wide-ranging crackdown on celebrities involved in such "yin-yang" contracts. Besides it, recently, Zheng Shuang's ex-husband Zhang Heng also broke the news on social media that Zheng Shuang was not satisfied with the 150 million film pay when filming the TV series "A Chinese Ghost Story", wanted 180 million, and finally talked about 160 million, knowing that high pay is illegal. To escape high taxes, Zheng Shuang signed a yin and yang contract, and 160 million yuan was turned into 48 million pieces of remuneration.
2 Tax evasion by artist’s personal studio
Chinese celebrities have been involved in tax evasion through false statements. Chinese actors Deng Lun and Ma Sichun were punished for tax evasion. According to the authorities, Deng evaded 47.66 million yuan in personal income taxes from 2019 to 2020 and 13.99 million in the same period (Zhong, 2018). The State Administration of Taxation has ordered Deng to pay 67.55 million yuan and a 16.45 million yuan fine for more than five years after the due date of the unpaid bill. Furthermore, Viya is a top streamer on the video platform, with more than 49 million fans. With her live streaming career, Viya has risen to fame as an internet celebrity and earned herself the title of "Livestream queen." Last year, she sold billions of dollars worth of products via her online store, earning her lots of money. But she was recently penalized due to tax evasion. Hours after, the authorities announced a staggering fine for her, and she had almost all of her online accounts across different platforms shut down. She also didn't report a large amount of income generated from paid social media posts. The authorities said the unpaid taxes totalled 1 billion yuan ($145 million), mostly from her online sales. She was also ordered to pay another 523.7 million yuan in penalties. Another example of a false income declaration to avoid paying tax is Wang Hong. China shut down the live streaming accounts belonging to 40-year-old celebrity Wang Hong and her mother, including a fan account with more than 10 million followers. Both were sentenced to two weeks in jail for tax evasion but were released on bail.
3 Tax evasion by purchasing real estate properties
Tax evasion and tax avoidance are two methods used by celebrities to manage their tax payments. When it comes to tax evasion, celebrities employ different methods. First, they pay a certain amount of money to the professional tax managers to supervise their assets overseas by "rent". Second, they purchase real estate properties through family and friends' names while using their funds, gaining ownership, and renting out these properties to tenants. This is a method that Chinese celebrities commonly use to avoid taxes by transferring ownership and management of their funds overseas which allows them to have more money for investments and avoid taxes at home. This is because the amount of tax that one has to pay if one owns a large amount of real estate is too high. Chinese tax law does not allow for the transfer of ownership without a considerable fee, and this is where celebrity family members step in and their friends. The individual in question transfers money to their friend or family member, who then purchases the real estate on their behalf and rents it out at their discretion. This allows celebrities to avoid hefty taxes while still making profits from their investments (Van Rooij, 2016).
In March 2015, the Chinese Academy of Social Sciences in Beijing published the "Third Report on China's Entertainment Industry." According to the report, as far as the use of Huaren Company is concerned, celebrities can avoid a lot of taxes that would otherwise be due if they purchase real estate with their names and people's names have no tax burden when buying property (Fisman & Wei, 2004). Moreover, celebrities need to play a role and have management skills. They can take advantage of their fame to manage the company profitably, and it does not cost anything for changing the ownership.
Chang Ting said that "the above methods ar