China Power | Society | East Asia

China’s ‘Common Prosperity’ Puts Tax-Dodging Celebrities On Notice

The new focus on wealth redistribution comes alongside a crackdown on celebrity fan culture.

China’s ‘Common Prosperity’ Puts Tax-Dodging Celebrities On Notice

Singer and actress Zhao Wei performing in the 2016 Spring Festival Gala.

Credit: Screenshot/ Vicki Zhao YouTube

The reform-era maxim “Let some people get rich first” has been reworked in Xi Jinping’s China of 2021. Under the new “common prosperity” policy, outlined by the Financial and Economic Affairs Commission on August 17, “The rich should bring others along with them … focusing on hard work and legally compliant operations.”

What “common prosperity” means in practice took shape on August 27 when the State Taxation Administration fined high-earning celebrity Zheng Shuang, as well as a number of corporations, for underpaying their taxes. Zheng’s penalty for hiding some of her income from television acting came in at 300 million Chinese renminbi ($46 million). The five corporations were ordered to pay a combined total of over 13 billion RMB.

These penalties were imposed just a day after Zhao Wei, another film star and singer, was removed from all streaming platforms and social media. The reason for Zhao’s falling afoul of the authorities is less clear, as neither she nor the government has issued any public comment.

Online communities outside of China’s censorship reach guessed at the reasons for Zhao’s de-platforming.

Toronto-based pundit Wen Zhao said Zhao Wei’s personal business dealings made her vulnerable to investigations by the financial regulators.

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“Some of you may remember, Zhao Wei in 2017 with her husband Huang Youlong acquired the company Wanjia Entertainment,” Wen told his YouTube audience.

“Owning a company like that once it’s listed on a stock exchange can send your net worth skyrocketing.But it was a leveraged buyout, done completely through debt … And Zhao’s connections and background aren’t deep enough for her to get away with it.”

The case of Zhao has similarities with that in 2018-19 of actress Fan Bingbing, who disappeared from the public eye for several months before resurfacing to issue an apology for having failed to pay taxes on her film earnings.

The mega-wealthy in the tech sector and entertainment will be first in line for “common prosperity” income redistribution, according to Wen Zhao. Under the campaign, said Wen, these individuals will be cowed into making donations to state-approved charities, and their “power to influence public opinion and particularly the opinions of the young” will be reduced.

“Any business that is making huge profits but doesn’t provide tangible goods that the [Chinese Communist] Party thinks society needs had better watch out,” Wen warned.

Celebrity high life conflicts with the government’s vision of society in a number of ways. A series of rules from the Cybersecurity Administration – which, coincidentally or not, were also issued last Friday – prohibit “celebrity worship” and regulate the “chaos” of fan communities, aiming to curtail the materialism and subversion of official values such communities are perceived as encouraging.

Chief among those values in recent years has been the importance of couples having children. In the face of a rapidly aging population, policymakers reversed the decades-old anti-natalist “one-child policy” in favor of a two-child and eventually three-child policy.

Apart from the fact that Zheng Shuang, one of last week’s main targets, may have been evading her tax obligations, she was also out of favor with the authorities for abandoning two children born in the U.S. through surrogacy services, which are illegal in China. Zheng expressed her regret to her ex-partner (who made the comments public) that the infants would act as a drag on her acting career. As her legal troubles deepened, Zheng issued a statement on Weibo on July 19, writing, “I apologize for the bad effects caused by my surrogacy, and I am willing to accept criticism and teaching from the public.” This was followed last Friday by another statement apologizing for her tax crimes.

Celebrities are an early and easy target of the “common prosperity” drive, according to California-based journalist and YouTuber Wong Kim.

“They really do have a lot of money. They earn more in a year than most companies make. For a treasury that is short on revenue, they are an ideal target. Besides, they all have some aspect of their financial dealings that can be picked apart as being not up to scratch.”

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An announcement from the tax bureau in March stated, “By 2022, significant progress will be made in the standardization of tax law enforcement, the convenience of tax and fee services, and the accuracy of tax supervision.”

As China’s economy takes a hit from the spread of the Delta variant, that progress can’t come fast enough.

Wen sees an ulterior purpose to the new drive, a policy of distraction recalling Mao Zedong’s orchestration of various campaigns against “bad elements.” Wen writes: “As the virus becomes an issue again, ‘common prosperity’ can be used to redirect anger away from political leaders and scapegoat the rich.”