NEW DELHI: The dispute between the American film studios and China Film Group Corporation has been resolved with the Chinese side agreeing to pay the money due in full.

According to Motion Picture Association of America (MPAA) Christopher J Dodd, a controversial two per cent rise in taxation on luxury goods that came into nationwide effect on 1 August was the cause of the dispute.

Previously there was a 3.3 per cent tax on ticket sales, in addition to the controversial five per cent paid to the opaque government film fund. The internal dispute between CFG which is China distribution partner for American studios and the US studios has been over who will pay the newly introduced two per cent that the film industry has suddenly been burdened with.

According to the trade agreement signed between the (then) vice president’s Xi Jinping and Joe Biden in February 2012 - US studios was guaranteed 25 per cent of revenue on imported films after all taxes had been paid by China Film Group.

According to Film Business Asia, unverified reports state that the state-owned CFG receives about 14.5 per cent of revenue on imported films, compared to the 25 per cent that goes to the US studios on non-flat fee deals. Cinema owners take a fixed 57 per cent of box office revenue. But the 25 per cent deal was made at the highest level of government and was never at risk.

It has not yet been determined how the two per cent will be accounted for outside of the US studios 25 per cent. There could be a reduction in the film fund to three per cent. Any decision may need to be approved at the next meeting of the State Council. What has been made clear is that under the agreement signed by Xi and Biden - the US studios' post-taxation 25 per cent take will still be honoured.