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TechPolicy

China’s tech crackdown: live-streaming e-commerce stars get a reality check from the taxman

  • The implications of this tax-focused campaign on the live-streaming sector could be huge for the world’s biggest e-commerce market
  • Chinese live-streaming stars Zhu Chenhui and Lin Shanshan have become the unofficial poster girls of this new crackdown

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Chinese live-streaming e-commerce stars Zhu Chenhui, left, and Lin Shanshan have become the unofficial poster girls of the new tax-focused crackdown. Photos: Weibo
Tracy Qu
The recent move by authorities in Hangzhou, China’s eastern e-commerce hub, to name and shame two popular online influencers for tax evasion and then slap both with hefty fines sent shock waves across the country’s live-streaming sector.
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Zhu Chenhui, known online as Xueli Cherie, and Lin Shanshan have now become the unofficial poster girls of this new campaign, which targets the booming live-streaming segment of China’s vast e-commerce market, where there is a spotty track record of compliance with China’s tax laws and regulations. Hangzhou’s tax authority imposed a 65.5 million yuan (US$10.2 million) fine on Zhu, while Lin received a 27.7 million yuan penalty.

The implications of this tax-focused crackdown are expected to be huge. Live streaming is already the best-paying job for fresh Chinese graduates, according to online classifieds platform 58.com, and a vital marketing channel for many foreign and domestic brands in the world’s biggest e-commerce market.

“[Tax avoidance] is very common not only in the live-streaming industry, but also in other high-income industries,” said Wang Yang, a lawyer at Beijing-based Yingke Law Firm. “If you need to pay 10 million yuan or even 100 million yuan in taxes, you would start thinking about different ways to pay less tax.”

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Setting up sole proprietorships to reduce tax is a common tax evasion strategy used in China’s entertainment and live-streaming industries, according to three lawyers interviewed by the South China Morning Post. Individuals face a tax rate of up to 45 per cent for personal wages and labour remuneration, while the highest tax rate for business income that a person gained through sole proprietorships is 35 per cent.

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Zhu, who has more than 15 million followers on microblogging platform Weibo, was fined for converting 84.4 million yuan in personal wages and labour remuneration into income for multiple sole proprietorships that she set up in 2019 and 2020. That scheme allowed her to avoid paying 30.4 million yuan in taxes, according to a statement by the tax authority in Hangzhou, capital of eastern Zhejiang province and home to e-commerce giant and Post owner Alibaba Group Holding.
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