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FilMart: Hong Kong Industry Executives Plead for Clarity on Mainland Chinese Tax Policies

At a time of heightened scrutiny of tax affairs in China’s entertainment sector, even industry veterans in Hong Kong are struggling to figure out how to operate in the new financial environment and pleading for more clarity from the Chinese government.

Hong Kong produces about 60 films a year, three-quarters of which are typically co-productions with the mainland. The Chinese film industry’s overhaul of its tax policies last year in the wake of a fraud scandal involving superstar Fan Bingbing has sown confusion in both the mainland and Hong Kong, which operates as a special administrative region with its own financial regulations.

During a discussion of mainland taxation issues Tuesday at FilMart, some panelists said that inconsistent enforcement of new policies in China and a general lack of knowledge was severely hampering cross-border business relations.

“The central government [in Beijing] has its policies, but the people implementing them below are all unclear on what to do. It says on the books that Hong Kong people can go invest in movie theaters, or can do this or that, but when you get over there, you’ll ask 100 different work units and not a single one will actually know,” said Ng See Yuen, a veteran Hong Kong exhibitor and producer with significant connections to the mainland industry through his UME cinema chain.

“Whoever I ask, they all don’t know,” Ng said to laughter and applause from the mostly Hong Kong crowd. “Clearly, just having the legal article there is not enough.”

Ng elicited further chuckles by saying that accounting in Hong Kong is “very straightforward… trustworthy, and professional,” but that, on the mainland, “the tax employees’ willingness to just act as they see fit is extremely strong, because in the mainland their freedom of explaining laws is extremely broad.”

He called on Hong Kong officials to create a special department designed to help local film industry professionals resolve taxation issues, saying he had been “very irritated” by the lack of information thus far.

“Now that Hong Kong is so intimate and cooperative with the mainland, when it comes to tax law, someone should clearly be giving us counsel and instructions,” he said.

Tsui Siuming, president of the HK TV Assn., compared the situation in China to having a single martial-arts master whose 10 disciples “each invented their own way of executing the moves.”

Tsui said it was “extremely common” for Hong Kong people to waste time and money trying to comply with written policies on establishing entertainment companies in China that “end up turning into nothing,” because mainland gatekeepers were themselves unclear on what was allowed.

“We need to be in solidarity and work together to obtain the conditions that our industry needs to develop in the way it requires,” Tsui said. “It’s a team effort.”

In 2016, Tsui and Ng took over the firm Kailu, which was involved in a scandal that involved the selling of sophisticated financial products against Chinese box office receipts to Chinese retail investors.

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