(Yicai Global) June 4 -- Fan Bingbing, the Chinese actress best known abroad for her appearance in X-Men: Days of Future Past, has denied an allegation of tax evasion as authorities in China launch an investigation into celebrity tax dodging. The shares of television and movie studios plunged.

A former host at state broadcaster CCTV alleges that Fan failed to pay more than CNY23 million (USD3.6 million) in tax by using a fraudulent dual contract system, known as 'yin yang contracts,' which if proved correct could send the star to jail.

Cui Yongyuan opened Pandora's box on his Weibo account last week, saying that Fan had signed a CNY10 million (USD1.56 million) contract for a four-day movie shooting to avoid paying higher tax, while another secret version of the contract added CNY50 million to her remuneration. Her production company yesterday denied that either she or it had ever inked such contracts.

The State Administration of Taxation ordered local tax bureaus to move on actors' dual contracts and vowed to take tougher action against tax cheats, CCTV reported. Officials from Wuxi Local Taxation Bureau, located in the same Jiangsu province where Fan's studio is based, began looking into her case yesterday, SAT said in a statement.

The case exposes just the tip of an iceberg in an era when celebrity incomes are extremely high, said Chinese media platform Entertainment Capital. The country's stars have a variety of sources of income, which offers temptations for complex tax planning and evasion. For example, the tax rate may be cut by 10 percent if an actor establishes a studio or declares the tax as a self-employed individual.

Share Sell-off

The shares of television and movie production companies bore the brunt of the news today. Fan's own studio, Zhejiang Talent Television and Firm, plummeted 10 percent, the daily trading limit. Huayi Brothers Media [SHE:300027], one of the country's biggest studios, and TV and movie producer Wuhan DDMS Culture [SHA:600136], also fell by the daily limit.

The 36-year-old Fan is one of the world's highest-paid actresses and models, and is considered a fashion icon. Forbes listed her as the world's fifth-highest paid actress in 2016, with income of USD17 million. But while she gets paid more than Tom Cruise, all of the highest paid stars in China are men.

Fan came to attention in 1998 through a Chinese TV costume drama called My Fair Princess. She has starred in many Chinese and overseas movies since, including two Marvel blockbuster X-Men and Iron Man sequels.

Cui's two Weibo posts received 480,000 likes, while Fan's studio said that he had infringed upon the actress's legitimate rights and interests and his allegation constituted libel. The studio's statement did not directly rebut the existence of the two contracts.

Editor: Emmi Laine