Chinese top streamers fined millions for tax evasion as livestreaming e-commerce soars
Updated 11:33, 25-Nov-2021
Zhao Chenchen

Two influential livestreamers Zhu Chenhui, widely known as Xueli Cherie, and Lin Shanshan have been fined 93.2 million yuan ($14.6 million) for tax evasion, Zhejiang Provincial Tax Service under the State Taxation Administration (STA) announced on Monday.  

The tax authority found that Zhu and Lin reported their personal income as revenues of over 10 of their sole proprietorship companies in different cities, thereby evading more than 43.5 million yuan ($6.8 million) in individual income taxes, the tax authority said in a statement. 

Hangzhou, capital of east China's Zhejiang Province, is home to e-commerce giant Alibaba, with its Taobao app being the most popular retail platform due to its growing business in livestreams. According to released financial results, Taobao's gross merchandise volume, or GMV, from livestreams climbed over 500 billion yuan ($76.4 billion) in the fiscal year that ended on March 31.

The growing volume of sales had attracted 1.23 million registered streamers as of 2020 in China, according to iiMedia Research. 

Among them, Li Jiaqi, a well-known influencer who first made his name known by selling lipstick on Taobao, and Huang Wei, better known as Viya, have long dominated China's livestreaming e-commerce.

For this year's presale livestreaming session on October 20 that ran up to the Double 11 shopping festival, Zhu ranked third on Taobao's livestream list, selling merchandise worth 930 million yuan in total, right below Li Jiaqi, who amassed sales of over 10 billion yuan ($1.65 billion), and Huang who hit a transaction volume of over 8 billion yuan ($1.3 billion).

Huang Wei (L) and Li Jiaqi participate in a campaign in Hangzhou, Zhejiang Province, east China, September 23, 2021. /CFP

Huang Wei (L) and Li Jiaqi participate in a campaign in Hangzhou, Zhejiang Province, east China, September 23, 2021. /CFP

Livestreamers, be it commission earners or those who take earnings in the shape of digital rewards, should pay income tax according to China's Individual Income Tax Law, said Li Sheng, chief partner at Beijing Zhi Pu Law Firm. 

Both livestreamers work for their influencer incubation company, Hangzhou Chenfan Group, in which Zhu is the chairwoman and Lin is the chief marketing officer. 

In China, the individual income tax is levied at a progressive rate, starting at 3 percent and going up to a maximum of 45 percent, which is applied to individuals with annual income of over 960,000 yuan.

By setting up sole proprietorship companies in cities with favorable taxation policies, high-income livestreamers could abuse the tax incentives designed for small and medium-sized businesses, such as having a fixed enterprise income tax rate of 5 percent. 

"Paying taxes is the obligation for every citizen," said Li. "When livestreamers enjoy revenue from massive traffic sales,  they should also regulate their norms of conduct to set up positive demonstrations." 

As the partnership between banks and tax authorities deepens and digital sales and tax invoices, known as e-fapiao in China, become increasingly common, taxation and audit measures have been strengthened using big data analysis. 

"The tax services have also found through big data that other influencers may have evaded taxes, and these individual cases are being investigated currently," the statement by the tax authority said.

China has been increasing scrutiny on tax evasion in the entertainment and livestreaming industry since September. The STA had released a guideline to intensify tax regulation on individuals and businesses in the entertainment industry as part of efforts to promote the sector's sound and long-term development on September 18. 

Zhu Chenhui, also known as Xueli, hosts a livestreaming event in Shanghai, east China, August 28, 2020. /CFP

Zhu Chenhui, also known as Xueli, hosts a livestreaming event in Shanghai, east China, August 28, 2020. /CFP

On the night of November 22, Zhu and Lin posted letters of apology on their Weibo account on which they started their influencer business, stating that they will suspend livestreaming business for ratification, and pay taxes in accordance with the law in the future. 

A Chenfan representative declined CGTN reporter's request to further comment.

(Cover: Taobao's livestreamers set up livestreaming rooms in shopping malls in Hangzhou, east China's Zhejiang Province, April 19, 2020. /CFP)

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