“Iron Man 3” is Hollywood’s most recent crowning achievement in the mainland of China, which wouldn’t be the first time an American blockbuster made headway in the 2nd largest film market in the world. The longstanding history of success may be the reason why China, in a surprise move, is currently implementing a tax on foreign films’ revenue within their country. This move by the Chinese government seems to have put major Hollywood studios in a standoff position by refusing to pay said tax.
Last year, an agreement was made, thanks to U.S. Vice President Joe Biden and President of China Xi Jinping, which would allow Hollywood more elbowroom in the growing Chinese market. In addition to that, it would ensure any foreign studio, Hollywood or otherwise, would earn 25% from box-office revenue in China. The U.S. studios contest that China’s new tax goes against this agreement and will most likely seek action from the Office of the U.S. Trade Representative, who would then make an appeal to the World Trade Organization.
The success of “Life of Pi” earned Fox $23 million from China’s total box-office revenue. However, China imposed a $2 million tax based off of its impressive run in their country. Fox is now refusing the money, insinuating that if they accepted, they would also enable China to continue to impose their potentially agreement-breaking tax on Hollywood. Several other studios, including Sony who will make a second attempt to release “Django Unchained” in China May 12, are assuming Fox’s position in refusing the tax. A potential outcome could mean that, if U.S. studios continue to resist, China would simply refuse to screen any Hollywood film from a studio that proves uncooperative. That being said, the hundreds of millions of dollars “Iron Man 3” continues to make may never be cashed on U.S. soil.