China super salesgirl fined $210 million for tax evasion

302
- Advertisement - [resads_adspot id="2"]

“Queen of live streaming” has 110 million followers on social media.

E-commerce has taken wealth creation to the next new level. Gone was the old expectation from parents that their children would want to become a doctor, a lawyer or an engineer. Likewise, teachers would probably get a shock today when students said they would like to become a YouTuber or an Influencer, jobs that never existed about 20 years ago.

But thanks to the internet and social media, a YouTuber or an Influencer could earn so much money that it would put professions of law and medicine to shame. And if you’re blessed with marketing, public speaking or sales skills, it’s possible to become a billionaire just by promoting products online. That’s what happens to China’s super salesgirl – Viya, whose real name is Huang Wei.

Finance Twitter

With over 110 million followers on social media (over 80 million followers on Taobao alone), Viya can sell practically anything on the internet. Known as China’s “queen of live streaming” – a format that combines infomercial and group chat – she sold products worth a whopping 8.5 billion Yuan (US$1.33 billion) just in one evening during the recent online annual “Singles Day” shopping spree on 11.11.

On April 1, 2020, everyone thought it was an April Fool joke with posters screaming “world’s first live broadcast of a rocket sale”. But not only more than two million online viewers tuned in to watch the sale, Viya actually succeeded in selling the rocket launch service, which national newspaper Global Times confirmed to be genuine, for 40 million Yuan (US$5.6 million).

Even though two Boeing 747 jets were bought on Taobao in November 2017, it was the first time that a commercial rocket launch was sold on the e-commerce platform. Prior to selling the rocket launch service, Viya, who specializes in beauty products, snacks, and household goods, managed to sell out 15,000 bottles of Kim Kardashian’s KKW-brand perfume in just a few minutes during 2019 Singles Day.

Finance Twitter

Live-streamer Viya was so influential that her audience places orders worth millions of dollars – every night – for cosmetics, appliances, clothing and even houses and cars. She said she would sell anything and everything her fans desire, including doorbells, carpets, toothbrushes, furniture, mattresses, and whatnot, thanks to Alibaba’s technology that allows people to watch a live stream.

The arrival of Covid-19, which forced many people under stay-at-home orders, doubled her viewership – and income. As her influence and revenue skyrocket, it also attracted the attention of the government. On Monday (Dec 20), tax authorities finally made the move and declared that the e-commerce influencer had “evaded 643 million Yuan (US$100 million) in taxes” between 2019 and 2020.

The State Taxation Administration has slapped Huang Wei with 1.34 billion Yuan (US$210 million) in back taxes, late fees, and fines – the biggest of its kind in Beijing’s sweeping crackdown on celebrities. The taxman said the live-stream shopping influencer had “concealed personal income by falsely declaring the commission income she earned from live streaming platforms”.

The tax officials in Hangzhou said – “If she can pay the tax, late fee and fine within the prescribed time limit, she will not be investigated for criminal accountability. If she fails, the tax authority will transfer it to the police department for processing according to law”. Expressing her guilt, the 36-year-old Huang admitted – “I am very remorseful and apologize to the public.”

Finance Twitter

But the punishment was just the beginning. Viya’s lifeblood, social media accounts of Taobao Live, Weibo and Douyin (Chinese version of TikTok), were effectively removed or deactivated on the same Monday. The government has also cancelled a title that promotes good behaviour on the internet, which was awarded to her in July.

The action on the celebrity is part of Beijing crackdown on tax evasion, which the government perceived as immoral behaviour in the entertainment industry that has been ongoing for too long. In September, the State Taxation Administration issued a notice of measures to strengthen tax administration in the entertainment sector, including live streamers.

To scrutinise the powerful industry, the Ministry of Commerce has revealed an “industry standard” for live streamers who market products on online shopping platforms. Among the rules included details about how hosts on such shows should dress or speak in front of the camera. The effect of the fine on influencer Viya was so obvious that the stock price of Alibaba plunged 5.8%.

According to consulting firm KPMG, the explosive growth of live streaming e-commerce market could be valued at 1 trillion Yuan (US$156 billion) in 2020. The job of a live streamer like Huang Wei, who specialized in selling products on the internet, has been categorized under a new occupation called “Online Marketers”, a profession that saw a growth rate of 9% every month.

The crackdown was part of President Xi Jinping’s “common prosperity” drive – a campaign which analysts said was designed to reduce economic inequality. This is not the first time Viya had committed an offence though. In June, she was fined 530,000 Yuan (US$83,221) for breaching advertising laws, after some of her fans complained that she was selling counterfeit products.

In 2018, Chinese megastar Fan Bingbing was fined a jaw-dropping US$129 million for tax evasion and other offences. The scandal saw her disappear for a couple of months, which later emerged that she had been detained and interrogated. She again went missing from the industry for two years, before making her appearance in 2020. Fan announced her breakup with fiancé, actor Li Chen, in 2019.

Finance Twitter

Viya’s fine, which is bigger than the one slapped on actress Fan Bingbing, speaks volumes about the influence and revenue commanded by the live streamer. Huang Wei had total sales of 38.6 billion Yuan (US$6 billion) in 2020 alone, the most among her peers. That’s about a third of US Department Store Macy’s global net sales of US$17.3 billion in the same year.

But what really concerned Beijing was her powerful force as an influencer. With a few clicks to disable or remove her social media accounts, however, the powerful influencer has been brought to her knees, crippling her online business empire. The man who was responsible for Beijing’s crackdown could be traced to none other than Alibaba founder Jack Ma, former richest man in China.

Ever since Jack Ma criticised Chinese financial regulation in a speech in October 2020, a regulatory storm has pummelled the country’s entire online financial and consumer sector, which has now spread to e-commerce live streaming. The dramatic suspension of Ant Group, which could add another US$37 billion to Jack Ma’s empire, was due to the billionaire’s “big mouth”.

Finance Twitter

Making critical comments about China’s financial regulator, he said – “Today’s financial system is the legacy of the Industrial Age. We must set up a new one for the next generation and young people. We must reform the current system”. Of course, the China Communist Party was not impressed with Jack Ma’s remarks, which were seen as not only arrogant, but an attempt to undermine Beijing.

The listing of Ant Group (valued at US$316 billion), which was scrapped, would make Jack Ma a very powerful man if it was allowed to proceed. Crucially, if Beijing did not show him who’s the real boss after he lectured Beijing how to run the country’s financial system, it could set a bad example for other super-wealthy or celebrities whose fame and influence could move hundreds of millions of people in China.

Essentially, the fine on Huang Wei was another message that no one can cross the red or legal line, regardless of industry or how rich or influential they are. Instead of spending huge resources in supervising the live streaming e-commerce, Beijing deliberately punished the super high-income earners to create a climate of fear so that everyone plays by the rules. And the first rule is – don’t try to evade taxes. – Finance Twitter