(Photo :Hollywood)

Recently, according to the Hollywood Reporter, the China Film Group has been withholding hundreds of millions of dollars, because Hollywood studios and China Film Group can't reach an agreement over a new 2% value-added tax that Beijing expects US Hollywood studios to pay. Hollywood studios refuse to pay for the extra tax. They complain that the VAT violates a World Trade Organization rule governing the film trade between the two countries. The China Film Group is the only organization allowed to import foreign films into China. It is the largest and most influential state-run film enterprise in China.

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However, based on the latest new revealed by persons in the know, it seems the recent anxiety about the issue is abating gradually. China's State Administration of Radio, Film, and Television (SARFT) are consulting with China's State Administration of Taxation (SAT) to exempt the 2% value-added tax for Hollywood studios. At the same time, China's State Council is going to intervene in the issue, and will discuss the matter at next meeting.

It is known Disney, Warner, Universal, Paramount, Fox and Sony, the six major Hollywood companies are holding a high-level consultation with China Film Group to put forward a settlement of the box office dispute.

Lindsay Conner, co-chair of the entertainment & media practice at law firm Manatt, Phelps & Phillips, expressed his personal opinion. He said: "In the end, it comes down to how many dollars or RMB each side gets to keep." But Conner thought that China Film Group should stick to the terms of the deal. Of course it is important for the Hollywood studios to maximize their revenue from China, but if China always breaks the rules, many investors will wary about investing in China. At last it will definitely cause losses for China.