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China puts a cap on salaries for film stars to crack down on tax evasion and 'money worship

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The Chinese government has imposed caps on the pay of entertainers in the country. (Getty Images/Getty Images)

In an effort to curb what's seen as "money worship," "sky-high salaries" and an avenue for tax evasion, the Chinese government has placed a cap on how much performers in the entertainment industry can earn in the country.

A directive from the Communist Party's Central Publicity Department was issued on Wednesday, demanding a stop to so-called "ying-yang contracts" and "unreasonable pay."

What brought that on?

Earlier this month, a former TV host released documents via social media alleging that actors in China have been using a sophisticated scheme designed to circumvent their full tax liabilities.

Officials allege that actors are signing two contracts when they negotiate their pay — one to be shown to the government, and another that reflects their true income for a project.

Chinese mega-star Fan Bingbing is the country's highest paid actress, who reportedly earns $17 million a year. She, specifically, was accused of using the false contract scheme, and her studio is being investigated by the State Administration of Taxation.

Fan insists she is innocent, while the threat to filmmakers has caused a dip in the shares of the country's entertainment firms. China's film industry is estimated to be worth roughly $8.6 billion.

So, what does the directive say?

Payments to stars may not exceed more than 70 percent of a production's total wage costs, and salaries as a whole must be capped at 40 percent of a project's total production costs.

The order was clear in saying that China's film industry should put "social benefit" before twisted social values.

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