August 13, 2018 / 6:29 AM / 4 days ago

Prominent Chinese videos sites vow to cap actors' pay amid tax evasion probe

BEIJING (Reuters) - China’s three largest video sites iQiyi Inc, Youku and Tencent Video have pledged to cap actors’ pay, as authorities ramp up their tax-evasion investigation into the country’s $8.6 billion film industry.

The logo for Chinese streaming platform iQiyi Inc., is displayed on a screen during the company's initial public offering (IPO) at the Nasdaq Market Site in New York City, U.S., March 29, 2018. REUTERS/Brendan McDermid

Their pledge, made over the weekend, comes months after accusations surfaced that some of the country’s most famous actors were signing “yin-yang” contracts - one contract setting out agreed payment terms and a second one with a lower figure for the tax authorities - to avoid paying taxes.

China's tax authorities launched investigations here in June.

“We call on all production companies and streaming platforms to work together to create a healthy environment for the movie and TV industry, and boost its prosperous development,” iQiyi, Alibaba-backed Youku, Tencent’s video streaming service and six production firms said in a statement.

The nine companies have agreed to cap actors’ pay at 40 percent of total production cost, with leading actors’ pay not taking more than 70 percent of cost on all paychecks, the statement said. These levels are in line with what the Chinese government has suggested in the past.

Like Netflix, iQiyi, Youku and Tencent Video are increasingly making their own movies and TV series.

So-called “yin-yang” contracts — a widely used expression in China meaning real and fake agreements operating side-by-side — are commonplace across the country, featuring in every type of acquisition from real estate to football clubs.

The Capital Radio and TV Program Producers Association, in a statement on Sunday, vowed to blacklist anyone who evades tax, breaks contract, or signs a “yin-yang” contract.

It also vowed to lower the proportion of actor pay in a overall production cost.

According to Forbes China Celebrity List for 2017, the country’s top earning celebrity was actress Fan Bingbing, who earned 300 million yuan ($43.64 million), followed by actor and singer Lu Han with 210 million yuan.

No Chinese actor or actress has been convicted of tax fraud under the latest investigation.

Reporting by Pei Li and Brenda Goh; Editing by Himani Sarkar

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