Tax Evasion Penalty 106 Million! Beauty Brands Take Deng Lun Off

From Fan Bingbing, Zheng Shuang, Viya, Cherie, to Deng Lun, stars and internet celebrities have become the hardest hit groups for tax evasion in recent years. While the brands’ spokespersons are frequently involved in negative incidents, the beauty brands also ‘have a sword’ hanging over their heads.

Today (March 15), actor Deng Lun was exposed as having committed tax evasion, and he was ordered to pay 106 million yuan. Very quickly the public was in an uproar, and this male star with multiple beauty brand spokesperson roles quickly triggered public opinion from all sides. The number of related readings on Weibo topics has approached 1 billion times.

Just now, brands including Sulwhasoo, L’Oréal Paris, Clear, etc. have quickly removed the shelves and deleted the relevant materials endorsed by Deng Lun. L'Oréal China replied to the "Cosmetics Business Online" reporter that L'Oréal Paris has stopped all cooperation with Deng Lun.

Repeatedly Urged, Still Unrepentant.

Deng Lun Ordered to Pay 106 Million Yuan for Tax Evasion

Between 2019 and 2020, Deng Lun's fictitious business converted personal labor remuneration into corporate income, committing false declarations to evade tax payments. He also has other underpayments in tax payments. He made false declarations by changing the nature of income through fictitious businesses, evaded personal income tax of 47.6582 million yuan, and his other underpaid personal income tax was 13.9932 million yuan.

In view of the above situation, the Fourth Inspection Bureau of the Shanghai Municipal Taxation Service pursued Deng Lun for tax collection, collected late fees and imposed fines totaling 106 million yuan. This was in accordance with the Provisions of the Individual Income Tax Law of the People's Republic of China, the Law of the People's Republic of China on the Administration of Tax Collection, the Administrative Penalty Law of the People's Republic of China and other relevant laws and regulations, it is in line with the Standards of Shanghai Municipality for Discretion in Tax Administrative Punishment.

Deng Lun evaded tax by false declaration through his fictitious business that change the nature of income. However, he took the initiative to self-check and paid back 44.5503 million yuan, for this amount he did pay he was fined 0.5 times, amounting to 22.2752 million yuan. For the amount that he didn’t take initiative to self-check and pay back: 3.1079 million yuan, he was fined 4 times the amount, to 12.4316 million yuan.

A few days ago, the Fourth Inspection Bureau of the Shanghai Municipal Taxation Service has delivered tax administrative treatment penalty decision to Deng Lun in accordance with the law.

The Shanghai Municipal Taxation Service stressed that, on one hand, since Deng Lun took the initiative to correct mistakes his tax evasion illegal acts should be dealt with leniently according to law. Deng Lun actively cooperated with the inspection and took the initiative to pay back the tax, and at the same time took the initiative to report tax-related violations that the tax authorities had not yet fully known. These are active mitigations of the harmful consequences of illegal acts. In accordance with the relevant provisions of the Law of the People's Republic of China on the Administration of Tax Collection, the Administrative Penalty Law of the People's Republic of China, and other relevant provisions, and in line with the Standards of Shanghai Municipality for Discretion in Tax Administrative Punishment, The Fourth Inspection Bureau of the Shanghai Municipal Taxation Service imposed a fine of 0.5 times on the amount that Deng Lun actively self-checked and paid back.

On the other hand, the illegal acts that Deng Lun failed to correct were seriously dealt with according to law. Deng Lun created fictitious business, changed the nature of income, made false declarations, evaded taxes, and did not take the initiative to self-check and pay back the tax. These violations are serious in nature. The Fourth Inspection Bureau of the Shanghai Municipal Taxation Service imposed a heavy penalty and a fine of 4 times in accordance with the relevant provisions of the Law of the People's Republic of China on the Administration of Tax Collection, the Administrative Penalty Law of the People's Republic of China and other relevant provisions, in line with Standards of Shanghai Municipality for Discretion in Tax Administrative Punishment.

It should be noted that the relevant person in charge of the bureau said:“In the comprehensive tax management in the cultural and entertainment field carried out since last year, through the analysis of tax big data, it was found that Deng Lun was suspected of tax evasion. Moreover, after being reminded and urged by the tax authorities, the rectification was still not thorough, so the case was filed in accordance with laws and regulations and a comprehensive and in-depth tax inspection was carried out.”.

Subsequently, Deng Lun personally posted a statement on social media stating that he deeply recognized his mistake, actively cooperated with the tax authorities, and was sorry for occupying public resources during the pandemic. At present, Deng Lun's social media account and studio account have been blocked.

Stars and Internet Celebrities Frequently Involved in NegativeIncidents.

Digital Brand Spokesperson Will Be the New Trend?

Since last year stars and internet celebrities have often been sent to hot searches due to various social issues. The brands that are deeply bound to celebrities and traffic also have been forced to be on the hot searches.

Within a few hours of the Deng Lun incident being exposed, many beauty brands and companies that had previously cooperated with him, including L'Oréal Paris, Unilever, and Sulwhasoo, had already emptied promotional materials.

Every time when a brand spokesperson is reported to have been involved in a scandal the brand bears the brunt of becoming the "target" of internet public opinion.  Some opinion say “it is injustice”, some applaud the exposure. Driven by traffic flow and the business environment, what actions should beauty brands marketing take?

The industry expert Bai Yunhu told the Cosmetics Business Online (CBO) reporter that such an incident is a big test of the brand's comprehensive judgment of the brand spokesperson and the planning of the marketing strategy.

“Similar incidents keep occurring. On the one hand, the business environment is trending to 'extreme interests/profits'. On the other hand, it is also caused by the 'vicious competition' of the industry.Therefore, beauty brands should be clear about their own needs and strategies. Between short-term interests and long-term interests, and between the performance growth and brand value precipitation, there should be independent thinking and measures.” He analyzed.

Bai Yunhu stressed that the rapid disassociation of relationships by brands is an inevitable choice caused by the rapid and wide dissemination of information in the digital age. Otherwise, negative effects such as hot searches will cause a fatal blow to the brand.

Finally, Bai Yunhu gives opinions from the perspective of business insight and communication characteristics. "From the perspective of future trends, digital brand spokesperson, virtual brand spokespersons, etc. will gradually begin to become a phenomenon, and even become a mainstream choice."