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Now This Is Bad Publicity

Actress Liu Xiaoqing's many incarnations have made her rich and kept China buzzing. But today she is cast in a new, unsavory role: tax cheat.


SHANGHAI — For more than two decades, movie star Liu Xiao- qing has held the nation spellbound with her Madonna-like ability to reinvent herself and stay on the cutting edge of China's stunning social transformations.

Whether it was playing a fresh-faced heroine of the Communist revolution, or becoming a best-selling author, business tycoon and self-proclaimed richest woman in China, she reveled in the role of trailblazer.

This summer, the 51-year-old actress may have landed a new role--that of the country's most famous tax dodger--and she landed in jail.

The Chinese call it "killing the chicken to scare the monkey." And if authorities were looking for a high-profile deterrent to tax evasion among China's new rich, they couldn't have picked a better person.

Within weeks of her arrest in June, at least half a dozen books about her life hit the shelves. Newspapers and magazines around the country jumped on the unfolding drama. Fans and foes alike clogged Internet chat rooms debating the significance of the "Liu Xiaoqing phenomenon."

"She shouldn't have identified herself as a 'billionaire,' " Cao Xing, a former lawyer, said in one of the new books, "The Tragic Movie Queen." "Ten billionaires cannot measure up to one acclaim as 'the people's artist.' "

Frightened fledgling capitalists, from entrepreneurs to entertainers, saw the writing on the wall and raced to pay their taxes. Overall tax revenue in the first eight months of the year shot up 11% compared with last year, state media reported. Of that, personal income revenue soared 24%.

If Liu had anything to do with this new level of awareness, it's testimony once again to her uncanny ability to stay relevant--for good and for bad.

Unlike in the West, paying taxes in China is still a novel concept. According to the State Administration of Taxation, personal income tax last year accounted for only 6.6% of China's overall tax revenue, many times below the norm in more developed countries. The bulk of the tax revenue comes from industries and businesses, both public and private.

Until recently, most Chinese were simply too poor. The threshold is income of about $100 a month, which still exempts the majority of Chinese. Even relatively well-off urbanites only make on average about $65 a month. Those wealthy enough to pay speak of a system full of loopholes and lax enforcement.

But a growing gap between China's rich and poor is fast becoming a potential cause for social instability. Early this summer, Chinese Premier Zhu Rongji decided he'd had enough and ordered a crackdown against the country's biggest tax cheats.

The scofflaws are legion: Of the 50 richest Chinese picked by Forbes magazine last year, only four had apparently paid any income tax. Two years ago, Forbes ranked Liu as China's 45th-wealthiest person, with assets of about $70 million.

Today she sits in a Beijing detention center for allegedly dodging $1.2 million in taxes. No trial date has been set pending the outcome of an ongoing investigation, her lawyer Yao Yanqian said. If convicted, she could face a maximum of seven years in prison.

'Tragic' Scapegoat

While few Chinese support breaking the law, there's a general consensus that Liu makes an easy scapegoat. Two businessmen whom Forbes ranked China's 2nd and 3rd richest reportedly are also under investigation for tax evasion, but most Chinese wouldn't recognize their names.

"Lots of people have gotten away with much more," said Chen Zihan, an editor of "The Tragic Movie Queen." "Her problem was she dared to flaunt her wealth and go against the grain of Chinese culture."

Whatever her crime, Liu's plight resonates with her generation. They shared the same deprivations and longed to make the great leap forward when the late "paramount leader" Deng Xiaoping said "to get rich is glorious."

Her twisting fortunes also mirror China's journey from a nation of the proletariat to a nation increasingly driven by the pursuit of wealth.

The daughter of undercover workers for the Communist revolution, Liu got her first break in 1979 when she was cast as a young guerrilla leader who risked her life to save a wounded Communist soldier. Her co-star in "Xiaohua," or "Little Flower," was Joan Chen. The award-winning movie made the two unknown actresses instant stars in China.

While Chen chose to leave and go to Hollywood, Liu stayed in the motherland and rode the wave of economic reforms.

"In the late '70s, China's art scene was practically nonexistent," said Wang Jianzhong, one of Liu's former business partners. "There were very few TV channels, and new movies were rarely made. It was relatively easy to become famous. Today it's quite possible that someone tells me they've been in 40 movies and TV dramas and I've never even heard of them."

China was changing fast. Liu quickly came to feel that fame without fortune was no longer enough.

As a fledgling actress in Beijing, she made only $6 a month. It was barely enough to buy food. Pretty clothes were the stuff of dreams.

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