Movie Companies Flee En Masse From Desert Tax Haven

Stricter tax regulations and policy changes in Khorgos are driving out production houses once drawn in by the city’s generous tax breaks.

The small northwestern Chinese city that borders Kazakhstan once attracted numerous film companies with its preferential tax policies. But Khorgos in Xinjiang Uyghur Autonomous Region is now seeing a massive exodus of such firms amid the strengthening of tax regulations following a multimillion-dollar scandal involving actress Fan Bingbing.

As of Oct. 8, there were over 22,000 companies registered in Khorgos, with 2,803 operating in the culture, sports, and entertainment sectors, according to a Tuesday report by The Beijing News. The same data showed that 87 companies in these industries had canceled their registrations, albeit without giving a time frame for when this occurred.

With its generous tax breaks introduced over the last decade, Khorgos Economic Development Zone — referred to as China’s Cayman Islands — became a lucrative hub for many entertainment companies looking to save money. Companies registered in Khorgos — though many didn’t have a physical location there — were exempt from corporate tax for their first five years and received a refund on value-added tax for payments exceeding 1 million yuan ($144,000).

Such policies have attracted big production houses and media entrepreneurs, including Fan, to register their companies or subsidiaries in Khorgos. However, seven years after the policy was introduced, the preferential tax policies have brought few boosts to the local economy and resulted in heavy tax losses for cities where the companies had previously been registered, according to financial news outlet Jiemian. Read the full article here.


– This is original content by Sixth Tone and has been republished with permission.