Back in March it was MPAA chief Chris Dodd tub-thumping China‘s box office prowess after the organization’s Theatrical Market Statistics report showed that China accounted for $2.7B in box office sales in 2012. That vaulted the country past Japan to become the world’s No. 2 movie market and justified the onslaught of U.S.-China co-productions geared toward gaining an extra foothold in the lucrative market. But it turns out there now may be a snag in that silver lining: Several studio sources are confirming that the Chinese government has not paid studios for their hits in that country for films released in 2012 and 2013, and an insider says that the MPAA recently stepped in to work on a deal with governing body China Film Group to pay U.S. studios for their share of Chinese grosses. Sister publication Variety reports that at the heart of the dispute is a value-added tax that the Chinese government is looking to impose that cuts into Hollywood’s 25% revenue share, and that the U.S. Trade Representative has stepped in with the MPAA to broker a solution. So far, though, no studios are willing to accept the lower payments in fear that it would validate China’s VAT proposal. A source close to the matter says the situation is “in flux at present”. Local films have gained market share in China this year, but Hollywood studios still see nothing but dollar signs when they look at China, so expect this one to get resolved quietly so as not to rock the boat. Stay tuned.

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