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ADJUSTING EXCESSIVE INCOME

China’s common prosperity drive is taking aim at wealthy internet influencers

A girl broadcasts at live streaming talent agency Three Minute TV in Beijing, China, February 11, 2017.
Reuters/Damir Sagolj
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The Chinese president Xi Jinping’s ambitious “common prosperity” goal aims to bridge China’s widening wealth gap, although exactly how it will do that is still vague. A flurry of philanthropic pledges from its most powerful tech giants showed support for the idea after Xi signaled its importance in August, and a long gestating property tax could finally make an appearance. Now rich influencers are also being enlisted in this drive.

Tax authorities in Zhejiang, an affluent coastal province that is a thriving center of e-commerce, said on Monday (Nov. 22) that they have issued tax-evasion penalties to two top internet influencers,  Cherie XueLi and Lin Shanshan, who have around 15 million and 9.5 million followers, respectively, on China’s Twitter-like Weibo platform. In China, a number of people have become wealthy celebrities by selling their own apparel brands or promoting other companies’ products in their livestreams—a way of marketing that gained further prominence in the country during the pandemic. Amid fierce competition, the top players in this field can sell billions of dollars worth of goods within hours, reaping handsome commissions from companies.

XueLi has to pay close to 66 million yuan ($10 million) toward overdue taxes and penalties, while Lin (who goes by Sunny on Weibo) owes nearly 28 million yuan ($4.3 million), according to the bureau, which said it used “big data” to identify their violations. The two influencers had set up multiple companies between 2019 to 2020, and “fabricated” business for the firms to convert their personal income to operating income of the entities to evade personal income tax, the bureau alleged. It is also looking into other individual influencers suspected of tax evasion.

In Weibo posts, both women apologized profusely and said they had inadequate knowledge of finance and taxation rules. They also promised to pay the back taxes and penalties in a timely manner and to suspend their livestreams until they were in compliance. Neither XueLi nor Lin immediately replied to requests for comment from Quartz.

The actions against the two influencers comes as the government has begun implementing measures under the common prosperity campaign, which gained prominence in August. China plans to roll out a pilot property tax and vowed to adjust “excessive income” through changes to personal income tax. In September, China’s national tax bureau ordered tighter scrutiny of celebrities and online influencers. Last month, a tax bureau in the Chinese city of Zhengzhou said it had recovered a delayed payment of around 6.3 million yuan in tax from an unidentified influencer.

Even before the common prosperity drive, Chinese authorities had heightened their focus on celebrity incomes and tax contributions. In 2018, Fan Bingbing, one of China’s most recognizable movie stars, vanished from public view for three months after a TV presenter accused her of tax evasion. She eventually remerged with an apology to the country and the Communist Party, and a roughly $130 million bill for back taxes and fines.

The cases of XueLi and Lin, among the first since the common prosperity drive, are generating mounting interest online. A hashtag about the penalty has shot to the top of Weibo’s trending topics and has been viewed over 450 million times. “Common prosperity, the iron fist of socialism, will only be late but not absent,” said a user commenting on the news.

Many internet users expressed shock at learning how much money influencers can make, given the fact even their taxes and penalties can amount to tens of millions of yuan, in a country where per capita annual income only recently crossed $10,000.

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