China Consumer

Losing influence

Shockwaves as livestreaming celebrities hit by heavy fines for tax evasion

Viya-w

Viya’s livestreaming empire in crisis after she was fined Rmb1.3 billion

When an estranged boyfriend exposed actress Zheng Shuang in 2021 for using a covert contract to conceal her true income for a television show, the public were shocked to find that the starlet got paid Rmb160 million for just 77 days of filming A Chinese Ghost Story. The incredible sum made Zheng, 29, one of the world’s highest paid actresses (it equated to more than Meryl Streep earned in 2020). Zheng was later hit with a massive punitive tax bill.

Less than a year later, one of China’s biggest livestreaming personalities Viya (whose real name is Huang Wei) was also being investigated by the tax authorities in Zhejiang province. She reportedly evaded more than Rmb640 million ($100 million) in taxes “by falsely reporting the commission income she earned from livestreaming platforms” between 2019 and 2020. As a result, authorities demanded that Viya pay Rmb1.3 billion in fines.

If the penalty came close to the tax she should have paid (and assuming a tax rate of 45%), the 37 year-old was estimated by industry experts sourced by Phoenix News to have made about Rmb6 billion over the last two years.

News about Viya’s fine quickly became the most talked-about topic on Chinese social media. “I make only a few thousand yuan a month and even I know the importance of paying taxes. You have made so much money and yet you don’t even think that’s enough!” one disappointed netizen thundered on Sina Weibo.

“How much is Rmb1.3 billion? Let me tell you what you can buy: two Boeing 737s, or two Long March 5 rockets. That’s equivalent to the entire cost of the Chang’e mission,” another mocked.

Viya is not the first celebrity to be caught for tax evasion. In November, popular livestreamer Zhu Chenhui (known as Xueli Cherie) and Lin Shanshan were fined Rmb65.5 million and Rmb27.7 million, respectively, for the same offence. Actress Fan Bingbing was fined Rmb883 million in 2018 for tax fraud as well. Like Xueli Cherie and Lin, Viya evaded income tax by filing her personal earnings as the income of companies that the fiscal authorities said she had fabricated solely for the purpose of understating her salary.

Viya’s sudden fall from grace was shocking, to say the least, as just a month ago she had raked in as much as Rmb8 billion in gross transaction value (GMV) on products sold on the first day of Singles’ Day pre-sales, behind only her biggest rival Li Jiaqi, who also set a record with Rmb10.6 billion in GMV.

“Wrong is wrong, I am willing to bear all the consequences for my mistake,” the livestreamer acknowledged in a statement. Before long, all her social media accounts had been taken offline. She hasn’t hosted a sales promotion since the tax evasion scandal either.

Then there is the collateral damage. Merchants that had lined up to appear on Viya’s future e-commerce shows were left in limbo. “Is there anyone who can help me? Viya suddenly couldn’t go live and I have 12,000 bottles of products that are stuck in our inventory. I don’t want our company to go bankrupt,” Yi Zihan, founder of the healthy snack company Qinxinhu, pleaded on his WeChat account.

Meanwhile, Viya’s closest rival Li appears to have dodged the tax bullet for the time being. The Shanghai-based influencer and other livestreamers were ordered to conduct ‘self-reviews’ of any tax-related misdeeds, correct any errors, and report to the relevant tax authorities before the end of the year. Li anxiously obliged, although the amounts involved were not revealed to public.

Without Viya, a lot of analysts question what will happen to Taobao Live, as she was instrumental in the success of Alibaba’s livestreaming platform. Many doubt that the bulk of her followers will flock to Li given there is little product overlap between the two. It is also doubtful whether the e-commerce giant can find someone to replace Viya’s star power in the short-run.

“It took Taobao Live six years to cultivate two big names in livestreaming: Viya and Li Jiaqi. Livestreaming hosts and the platform have a symbiotic relationship: if it weren’t for the support of the platform and large amounts of traffic, the two wouldn’t have been able to be who they are today. But that unique background also renders it difficult to create the same phenomenon again,”wrote blogger E-commerce Toutiao.

But then again, Alibaba may not want to create another influencer with Viya’s status. “Even though Viya and Li have formed a huge traffic advantage for the platform, [the two are so formidable] there is also no way for Taobao Live to insert any checks and balances on them. Even if the two bring new traffic to Taobao Live, these are not fans of the platform, but fans of the two,” E-commerce Toutiao reckoned.

That’s a problem Kuaishou encountered when Xin Ba, the most famous livestreamer on that platform, almost monopolised its e-commerce promotion business. He generated so much in sales for Kuaishou Live that it couldn’t afford to offend the influencer. He also represents other influencers, many of whom have become household names too (see WiC517).

Becoming overly reliant on Xin, however, had its problems. They came to a head when, in 2020, Xin became embroiled in a controversy over sales of fake bird nests (an expensive Chinese delicacy). He was fined Rmb900,000 and Kuaishou then blocked him from livestreaming for 60 days. Since then, Kuaishou has made an effort to nurture a wider range of influencers to avoid an overdependence on Xin.

“Whether it is a small livestreamer or a brand owner, it is impossible to get around Xin Ba on Kuaishou. He became completely out of Kuaishou’s control. For the platform, the risk is too great,” E-commerce Toutiao explained.

Taobao Live, too, has been quietly adjusting its livestreaming strategy to avoid being overly reliant on Viya and Li. Since last year, the e-commerce giant has offered more support to merchants to host their own sales shows. In the last Singles’ Day, Taobao Live dedicated a lot of resources to supporting up-and-coming hosts and directing consumers to the brands’ own channels.

Some think that the best days for e-commerce super influencers have passed. Others argue that it is about time that the government regulated an industry that has experienced meteoric growth.

“Judging from the endless news in the past two years, the livestreaming industry is very chaotic and tax evasion is only the tip of the iceberg. There is also data fraud, ‘brushing’ [faking orders] and counterfeiting, which have long plagued the industry,” commented Zijin Finance.

Meanwhile, Time Weekly reported last week that Baidu is laying off almost its entire livestreaming division. According to company insiders, its acquisition of YY’s livestreaming arm, which Baidu bought for $3 billion back in 2020 (see WiC517) hasn’t gone to plan. “A lot of executives at Baidu did not know the details of YY’s business and things started falling through the cracks. At one point, YY made it clear that it did not want to have meetings with people from Baidu Live and the two have rarely interacted since then,” the insider told Time Weekly. “Baidu now regrets the acquisition of YY and wants to back out. But what’s done is done. Even reversing the deal is going to be a painful and long process.”


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