Two of China’s most influential live streamers, Chenhui Zhu and Shanshan Lin, were ordered to pay out 65.55 million RMB ($10.26 million) and 27.7 million RMB ($4.34 million) respectively towards overdue taxes and penalties, according to a statement published by Zhejiang Provincial Tax Service on 22 November.
With over 33 million followers on Chinese social media, Zhu is the third-best performing live streamer on the e-commerce platform Taobao. Zhu is followed closely by China’s live-streaming megastars, Li Jiaqi and Viya. Lin ranked sixth with more than 10 million followers.
Zhu, who also goes by the name Xueli (Cherie), founded the fashion apparel brand Xueli. Zhu and Lin are reportedly the two main shareholders of an investment management company that was founded by Zhu.
The two influencers were found to have evaded personal income tax by setting up sole proprietorships in different places in China between 2019 and 2020. The rationale behind this lies in China’s fairly high-income tax rates for high earners.
Those who earn more than 960,000 RMB per annum face a top income tax rate of 45%, compared to a 35% top rate for taxable personal income from a privately owned business. Corporate tax stands at 25%, whilst some tech enterprises may qualify for a lower rate of 15%.
The actions against the two live streamers come after the Chinese authority vowed to “clean up and regulate unreasonable incomes, rectify the order of income distribution, and eradicate illicit income,” as a response to Xi Jinping’s stress on “common prosperity“.
Scrutiny on celebrities and online influencers has been tightened as the entertainment industry has been the focus of major tax evasion campaigns. Two high-profile Chinese actresses Zheng Shuang and Fan Bingbing were slapped with hefty fines earlier this year.
Following the blow-up, the two KOLs published apologies on Monday evening through their Weibo accounts, saying that they will suspend their live streaming to enhance their compliance, including paying the required tax and taking more social responsibility.
This punishment has been a wake-up call for China’s live streaming industry. With the Chinese government starting to implement measures under the common prosperity campaign, future live streaming events will expect to be exercised with more caution as online influencers face closer scrutiny.