Hollywood gets a lesson on doing business with China 

China owes Hollywood millions after halting payment for films


LOS ANGELES: China has stopped paying Hollywood studios for its films in a dispute over a Chinese tax on movie profits, Hollywood trade papers reported Tuesday.

Tens of millions of dollars in box office revenues are owed in arrears to the likes of Disney, Warner, Universal, Paramount, Fox and Sony, according to The Hollywood Reporter.

The magazine said China's state-owned movie distributor, China Film Group, owes more than $31 million to Warner for “Man of Steel,” $23 million to Sony for “Skyfall” and $23 million to Fox for “Life of Pi.”

China stopped payment at the beginning of the year, when American studios took issue with a two per cent value-added tax that the world's most populous nation was levying on US films.

Chinese authorities want the studios to pay them the tax, but the studios argue it violates a World Trade Organization agreement governing the film trade between the two countries.

In the accord last year, heralded as historic by the United States, the two countries agreed that China could import 34 US blockbusters a year (up from 20) and studios' revenue share from China was fixed at 25 percent (up from 13 to 17 per cent).

The Motion Picture Association of America (MPAA), which acts on behalf of studios' interests, is negotiating with Chinese authorities, to resolve the tax dispute.

In the meantime, lack of profit has not deterred US studios from sending their films to China, which currently has the world's most dynamic movie market, in the aim of cementing a long-term foothold.