When director Feng Xiaogang released Cell Phone 15 years ago, the low-budget film about infidelity went on to become the biggest surprise of the year, taking over Rmb56 million (a hefty sum at the time) at the domestic box office.
The dark comedy tells the story of a TV show host (played by Ge You) caught having an affair with a young woman (Fan Bingbing) after accidentally leaving his phone at home.
The success of the film helped turn Fan into a superstar. Since then, she has become one of the most widely recognised faces in China and beyond. An annual attendee at the Cannes Film Festival, she recently announced a major casting breakthrough in spy thriller 355 alongside Hollywood stars Jessica Chastain and Penelope Cruz.
Fan made more headlines last week when she splashed Rmb200 million ($30 million) on a luxury penthouse apartment in Shanghai.
Cell Phone was not universally appreciated. however. In fact its success upset former TV host Cui Yongyuan, because it was rumoured that Feng had based Ge’s character on Cui. Indeed, the TV personality claimed that the film caused enormous distress to his family, with many assuming that he was also cheating on his wife. Scriptwriter Liu Zhenyun later apologised but Cui says Feng has never expressed any remorse.
Cui was thus furious when Feng decided to direct a sequel. Cell Phone 2, again starring Fan and Ge. It is currently being filmed, with the actress posting on her Sina Weibo account last month that she was excited to be reprising her role.
Cui – now a zimeiti (high profile bloggers often with an industry or journalist background) – has struck back by posting images of two employment contracts online, worth a combined Rmb60 million. Allegedly, Fan signed them for four days work on Cell Phone 2. The document, which is blurred out in places, stated that the actress had the right to amend the script and there were other diva-like conditions, such as five-star accommodation, provision of a voice coach and make-up artist, and having two limousines on call.
Many netizens praised Cui’s whistleblowing exploits. Others were incredulous at how much Fan gets paid: “Now I finally know why so many people want to be celebrities. They make more money in a few days than we can in a lifetime,” one lamented.
“If scientific researchers had such high incomes, we could have developed our own microchips a long time ago,” another netizen wrote, referring to the ban that prevented Chinese telecom giant ZTE from buying essential technical components from American suppliers like Qualcomm.
But others said Cui crossed a moral line by posting confidential contracts online.
“First of all, a star is a commodity and the value of such a commodity is determined by the market. So we are in no position to judge whether she deserves the salary. Secondly, while Cui Yongyuan hates Feng Xiaogang and Liu Zhenyun, there is absolutely no need to drag other innocent people into the feud. Cui posted the big fee online to prove that he is honest and upright: certainly not the same person portrayed in the film. But what he did today shows that he is exactly like that,” another entertainment blogger wrote.
But the most damaging allegations in Cui’s revelations are that Fan had allegedly signed two contracts – one for Rmb10 million and the other for Rmb50 million – seemingly to avoid paying a higher amount of tax on her income.
The tactic – known locally as a ‘ying-yang’ contract – sees the contract with the smaller amount submitted to the tax authorities.
“If Cui’s exposure is true, then the nature of the incident is no longer about how much a star gets paid but a major uncovering of an illegal act of tax evasion. The parties involved could face not only fines but also jail sentences,” warned Legal Daily.
Fan’s film studio, Fan’s Workshop, denied any tax evasion. “Cui’s decision to expose confidential documents and publicly insulting Fan not only breaks business rules but infringes on Fan’s legal rights,” her company wrote in a post.
The studio also said it has hired a prominent lawyer to deal with the matter.
Cui has backtracked on some of the accusations, saying that the Rmb50 million contract is not actually Fan’s. But he is hinting that he has access to similar material. “I’m not clarifying [the rumour]. I have a drawer of [similar] contracts,” he warned in a video interview posted after the original leak.
His posts have already attracted the attention of the tax authorities in Jiangsu, where Fan’s company is based. State television also reported that the State Administration of Taxation had ordered the relevant bureaus to “investigate and verify online allegations that TV and film actors evaded taxes by signing two contracts,” adding that anyone found guilty of breaking the law will be “punished accordingly”.
Tax evasion in the entertainment industry is hardly unknown. Actress Liu Xiaoqing was found guilty of it in 2002 and sentenced to 14 months in prison, while Taiwanese model-actress Lin Chi-ling was made to pay a fine for taxes she owed back in 2008.
In addition to dubious ‘ying-yang’ contracts, many A-list stars have set up their own personal film studios as the tax rate for individual income – around 40% – is higher than that for business income, which is no more than 35%.
Many film studios have also chosen to register in Khorgos, a little-known city in Xinjiang near the border with Kazakhstan. It has become home to nearly 1,600 film and media companies, says National Business Daily. Companies registered in Khorgos enjoy a corporate tax holiday for up to five years. In the subsequent five years, they have to pay tax to the central government, but they are exempted from the local proportion of corporate tax, says Sixth Tone.
Industry insiders say another way to get around taxes is by opting to receive payment in shares in listed companies instead of a salary.
After Fan’s remuneration began to receive widespread attention in the media, share prices at studios affiliated with the actress began to drop. Zhejiang Talent Television & Film, in which Fan owns a 1.6% stake, plunged 9.6% in Shenzhen to its lowest level since March 2015.
Zhejiang Huace Film & TV and Huayi Brothers also saw their shares drop 7.2% and 10% respectively.
“The market is very concerned about the excesses in the industry,” Wu Kan, a fund manager at Shanshan Finance in Shanghai told the South China Morning Post. “Tax evasion and money laundering do exist in entertainment circles. These issues are now on the table.”
Keeping track, Aug 17, 2018: We reported on allegations that film stars like Fan Bingbing had been signing ‘ying-yang’ contracts that help them avoid paying a higher amount of tax on their incomes. The accusations prompted a general review of the movie industry’s pay arrangements which seems to have spilled over into a crackdown on celebrity salaries. China’s largest film studios have agreed to follow pay limits for actors as the government takes aim at the incomes of the country’s biggest stars. The guidelines, issued by the media regulator earlier this summer, stipulate that total pay for a cast cannot be more than 40% of a film’s budget and that individual actors cannot take home more than 70% of the total going to the cast. Video streaming sites iQiyi, Youku and Tencent Video have also signed pledges to limit salaries of television actors to a maximum of Rmb1 million ($145,000) per episode and Rmb50 million for an entire season. More than fifty TV stars can expect to see their pay reduced as the new caps go into effect, estimated the Beijing News.
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