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Hollywood claims victory in box office dispute with China

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MPAA reaches resolution with China Film Group over controversial luxury tax, though details remain unclear

Hollywood Sign
Hollywood Sign

Hollywood studios emerged victorious in a tax dispute with the Chinese government this week, after a lengthy standoff with a state-owned film distribution company. As the Wall Street Journal reports, the Motion Picture Association of America (MPAA) and distributor China Film Group reached an agreement Tuesday over a two percent value-added tax that Beijing began levying on all domestic box office receipts last year. American studios had refused to pay the duty on the grounds that it violated existing revenue agreements, and declined to accept any payments from China Film Group. Now, the situation appears to have been resolved in the MPAA's favor, allowing US studios to cash in on the hundreds of millions of dollars in box office sales that had been frozen.

"all money due will be paid in full."

"We are pleased to hear that the Chinese government has addressed the matter and all money due will be paid in full," MPAA chief executive Chris Dodd said in a statement to the Wall Street Journal. Details of the agreement remain unclear, with neither party specifying whether the tax had been dropped entirely, or if the MPAA must only pay a fraction of it. "We implement rules according to the national policy," a spokesperson for China Film Group told the Journal, without providing further comment.

The tax row dates back to November 2012, when Life of Pi — the first film to be affected by the tax — was released in China. Other implicated titles include Skyfall, Man of Steel, and Pacific Rim.

Tensions between Hollywood and Beijing have ran high in recent years, with US studios looking to gain more of a foothold in the market and the Chinese government looking to protect its domestic industry. A bilateral trade agreement signed last year raised the quota on US films that can be distributed in Chinese theaters, while allowing foreign producers to retain a greater share of domestic revenues. China is already the second-largest movie market behind the US, and many expect that it will be the biggest by the end of the decade.