Famous Chinese influencer Viya was in the darkest hour of her career on December 20 when she was fined 1.341 billion yuan (US$210 million) for tax evasion. Her livestreaming channel on Taobao was subsequently banned by the platform.

Viya’s fall from her peak marks the end of a "Wild West" era for the e-commerce livestream industry, as thousands of influencers rushed to check their own tax filings to comply with relevant laws and regulations in China.

See also: China Asks Influencers to Report Tax Violation by Year End after Top Livestreamer Fined $210 Million

Internet influencer Viya, whose real name is Huang Wei, evaded 643-million-yuan in upaid taxes by declaring personal income as income for proprietorships in 2019 and 2020, according to a statement released by Hangzhou Taxation Bureau on Monday.

Viya was fined a total of 1.341 billion yuan for the 643-million-yuan tax evasion and 60-million-yuan underpaid tax. The total fines include repayment of the evaded tax, overdue charges and penalties.

Viya complied with the tax inspection and voluntarily disclosed other tax evasion offenses that the bureau was unaware of, the bureau said in the announcement.

She later said on Weibo that she fully agreed with the authorities’ decisions and would work to pay the fine. She apologized in her statement.

Besides the huge fine, Viya and her team are also struggling to handle the backlash from livestreaming platforms and the public. Viya’s livestreaming channel on Taobao, through which she promoted and sold products to consumers, were banned. Her Weibo account was also inactivated by the platform.

As one of the most popular influencers in China, Viya was known for her ability to sell literally anything through her livestreaming channel. Around 8.25 billion yuan worth of orders were placed through her livestreaming channel on Taobao at the Double Eleven Shopping Festival Pre-Sale event that took place on October 20, breaking records. Viya also ranked first with 31.09 billion yuan in sales on the iiMedia Research 2020 Top 5 Chinese E-Commerce Livestreamer Chart, leading far ahead of runners-up Austin Li and Xin Youzhi.

This is not the first time for tax inspection authorities to probe into tax evasion offenses from influencers in China.

Popular influencers Cherie and Lin Shanshan were also fined 65.55 million yuan and 27.67 million yuan respectively for tax evasion on November 22. Hangzhou Taxation Bureau detected anomalies in their tax filings through big data analysis and initiated investigations that eventually led to discovery of their offenses.

Both Cherie and Lin Shanshan were canceled on the Internet after the news broke out. Many of their social media accounts and online shops were banned.

“This (Viya’s case) is a wake-up call to every influencer in the livestreaming business,” China News Service pointed out in an article. “This is a serious lesson for every influencer. They must comply with the tax law as they grow their wealth.”

Viya’s fall from grace is a potential catalyst that will discipline the industry and lay a crucial cornerstone for the industry to develop in the future.

Tax inspection authorities are expected to continue cracking down on the e-commerce livestream business and bringing order to the industry.

A turning point for e-commerce livestream

E-commerce livestream started to gain traction in 2016. The proliferation of smartphones and 4G network in China enabled the rise of thousands of livestreaming platforms in China in that year. Livestreaming channels became virtual spaces where consumers shop and purchase goods.

In March 2016, e-commerce giant Taobao unveiled its livestreaming platform Taobao Livesteam, which got its separate app in 2019. Users started to see e-commerce livestreaming content on TikTok’s Chinese sister Douyin and Kuaishou in 2018.

Although Taobao, Kuaishou and Douyin tapped into e-commerce livestream at different times, they all have their signature influencers. Taobao livestream has Viya and Austin Li. Kuaishou and Douyin, on the other hand, have Xin Youzhi and Luo Yonghao respectively.

As of June 2021, the audience base of online livestreaming reached 638 million, 384 million of which watched e-commerce livestream, according to a report released by the China Internet Network Information Center. E-commerce livestreaming audience accounted for 38% of the total livestreaming viewers in China.

The growing audience of e-commerce livestream allowed influencers to make tons of money while driving Taobao, Douyin and Kuaishou’s e-commerce business forward.

Taobao Livestream’s GMV (Gross Merchandise Value) reached 400 billion yuan for the entire 2020 while Kuaishou’s GMW hit 381.2 billion yuan during the same time, fiscal reports show.

Douyin’s GMV, on the other hand, grew to more than 500 billion yuan in 2020, which is three times greater than that in 2019, LatePost reported.

In 2020, China’s e-commerce livestream industry reached 1.05 trillion yuan, a number that is expected to grow to 2 trillion yuan in 2021, a report on the e-commerce livestream industry released by KPMG and Alibaba Research Institute shows.

The rapid rise of the e-commerce livestream industry naturally caught the attention of tax inspection authorities.

The State Taxation Administration of China announced in September this year that relevant authorities shall enhance taxation inspection of e-commerce livestreamers and emphasized that authorities shall notify livestreamers with taxation issues to rectify their operation and pay up their tax.

As tax inspection authorities tighten up control over the e-commerce livestream industry, tax-related costs will increase for livestreamers and their companies. Small and mid-sized livestreamers with low transaction volume might even have to exit from the business because it will be no longer profitable for them.

The fall of top influencers such as Viya and Cherie might restructure the entire industry as the power that third-party independent livestreamers hold gradually decreases.

What happens if Taobao Livestream loses Viya?

Viya’s livestreaming channel on Taobao has been banned and its resumption is still pending.

In 2020, Viya sold 31.09 billion yuan of goods while Taobao Livestream’s GMV was a little over 400 billion yuan. This means Viya contributed around 8% of the total GMV on Taobao Livestream. Austin Li, another top livestream influencer on Taobao Livestream, garnered a transaction volume of 21.86 billion yuan. Viya and Li accounted for about 13% of the total GMV on Taobao Livestream.

The public has been itching to learn whether Li has paid his tax in compliance with the tax law after Viya’s tax evasion case was reported.

Even if Viya could resume her livestreaming channel after paying up the fine and her tax, her reputation will no longer be intact.

Losing Viya will have a significant impact on Taobao Livestream’s GMV and growth.

There is more to top influencers’ relationship with e-commerce livestreaming platforms.

Kuaishou versus Xin Youzhi is a perfect case to put the conflicting relationship between top influencers and livestreaming platforms into perspective.

In 2019, Xin’s team already accounted for around 22% of the total GMV on Kuaishou. Faced with Xin’s growing power on the platform, Kuaishou took measures to curb Xin’s growth. In June this year, Xin publicly called out Kuaishou on his livestreaming channel, accusing Kuaishou of exploiting livestreamers and limiting traffic to his channel. Xin even sued Kuaishou, according to open information on Tianyancha.

Taobao has similar issues with top influencers on its platform as well. Analysts once asked Alibaba’s CEO Zhang Yong whether Taobao would distribute traffic to influencers in a more balanced way because more and more traffic and transactions were going to top influencers in the field.

Zhang’s response was very interesting. According to Zhang, Taobao’s livestreaming ecosystem is robust because it has both top influencers and vendors doing livestreaming. Alibaba provides the platform and would not redistribute traffic in e-commerce livestream, Zhang said, stating that the ecosystem should be an open market where consumers can support whoever they want. Taobao will continue to nurture more influencers, including young livestreamers who are working for vendors, to create more livestreaming content, Zhang concluded.

Taobao Livestream has been providing support for vendors’ livestreamers and mid-sized influencers on the platform since 2020.

During the Double Eleven Shopping Festival this year, over 100,000 brands interacted with consumers through their livestreaming channels on Taobao Livestream, 43 of which achieved a transaction volume of over 100 million yuan on their livestreaming channels, statistics from Tmall show. 510 livestreaming channels boasted sales of over ten million yuan. To date, around 70% of the livestreaming channels on Taobao Livestream are run by vendors or brands on the platform.

It is apparent that Taobao does not intend to put all the eggs in one basket and relies solely on influencers to drive its e-commerce livestream business.

In the long run, the e-commerce livestream industry will become more equitable and regulated. Truly competitive e-commerce enterprises do not thrive by lowering costs from tax evasion. Influencers on e-commerce livestreaming platforms must comply with the country’s tax law in order to grow and prosper with the platforms.

Tight tax inspection might actually benefit e-commerce platforms in the long run.

(The article is translated and edited with authorization from the author @好看商业, please note source and hyperlink when reproduce. The original article can be found here.)

Translator: Garrett Li