Hollywood Wins Tax Dispute With China, But at What Cost?

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A dispute between Hollywood and China’s state-owned film distributor has finally been settled with the American film studios coming out on top, The Wall Street Journal reportsChina Film Group Corp. will be forced to pay the studios hundreds of millions of dollars in box office payments that have been held out in an attempt to deduct tax from the American studios’ share of ticket sales.

The standoff revolves around a new value-added tax and an agreement from last year allowing foreign movie producers to collect on up to 25 percent of Chinese ticket sales. China Film Group Corp. attempted to deduct the roughly 2 percent tax from American studios’ share of the ticket sales, but the studios argued that the tax was not their responsibility. As a result, American studios rejected any payment whatsoever from the Chinese distributor.

The Motion Picture Association of America’s Chief Executive Chris Dodd said in a statement, ”We are pleased to hear that the Chinese government has addressed the matter and all money due will be paid in full.”

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