A $1.7 Billion Tax Crackdown Is Paralyzing China's Film Industry

One day last July, Fan Bingbing, China’s highest-paid movie star, seemed to vanish from the face of the earth. Her disappearance occurred around the time the government opened an investigation into Chinese film industry tax practices. Both her fans and film executives feared the worst. But in October Fan reappeared as mysteriously as she had vanished. She made a public apology to her fans and agreed to pay more than $100 million in back taxes .

The 37-year-old Fan’s public humiliation unleashed a deep chill in an industry that until recently had been humming along. Every week brought fresh reports of stars and companies under scrutiny. Industry tycoons coughed up a stunning $1.7 billion in back taxes after the government urged them to engage in “self-examination and self-correction.” That, in turn, has prompted a flurry of TV and movie cancellations and even the liquidation of entire companies.