Xinjiang city a ‘ tax haven’ for entertainment
Horgos off ers favorable policies to cultural sector
“You can say it’s a way of avoiding taxes, but it’s a reasonable way.”
Chen Changye,
a Beijing-based independent film industry analyst
A small city in Northwest China’s Xinjiang Uyghur Autonomous Region has become a “tax haven” for domestic entertainment companies, offering favorable policies including huge tax breaks to attract cultural and entertainment companies to register in the city.
Horgos, located on the China-Kazakhstan border, has attracted 1,476 companies from the film and media sectors since it was designated as an Economic Development Zone by the central government in 2011, Wang Gang, Party chief of Horgos, said during a forum hosted by the city on June 23.
The number of film and media companies registered in Horgosh as increased by 50 percent each year on average, Wang told the forum, which focused on cooperation in the film and media industries under the “Belt and Road ”( B& R) initiative.
Horgos, once just a stopping point for trade caravans on the ancient Silk Road, has become a crucial site on the route of the B& R initiative and a beneficiary of many policies and much fiscal support from the central government, including the establishment of the Horgos Economic Development Zone.
Wang said that the dramatic increase of film and media companies registered in Horgos was due mainly to various favorable policies created by the national and Xinjiang regional governments as well as the city’s unique situation and industry advantages.
In particular, film companies fall under the cultural and tourism sectors, which are among the areas eligible for tax exemptions approved by the State Council, China’s cabinet, in 2011, when it approved a plan to establish the Horgos Economic Development Zone.
The State Council, in a policy document published in 2011, stated that companies in “areas of importance” could be exempted from paying any business income tax in the first two years after registration and required to pay only half of the actual business income tax during the following three years after that.
But the flood of film and media companies into the city attracted substantial domestic media attention.
Some outlets even suggested that the companies only moved to Horgos to take advantage of the favorable policies and to therefore “avoid taxes.”
Industry insiders and experts
said that entertainment companies, given their great flexibility in terms of office space and personnel, tend to respond to favorable policies more than companies in other sectors do.
“These companies went to Horgos most likely because the city offers more tax cuts for their businesses than other cities,” Zhao Mingyang, an investment director at Beijing- based fund manager Tianxing Capital, told the Global Times on Monday.
Zhao added that cultural and entertainment companies rely on talented staff , who tend to be in major cities such as Beijing and Shanghai, but such companies can register in one city and operate in another. “That’s why they can follow better policies anywhere,” he said.
H or go sis not the first city to get a flood of film companies, according to Chen Chang ye, a Beijingbased independent film industry analyst. “Before Horgos, there were Hengdian [ in East China’s Zhejiang Province] … and Shanghai,” Chen told the Global Times on Monday.
For example, fellow Xinjiang city and nationally recognized economic development zone Kashgar has attracted 1,163 cultural and entertainment companies and Dongyang in East China’s Zhejiang Province has 2,092, according to Yan Xiaojia, executive director of the Beijing- based Chinese Investment Data Institute.
Yan said that the recent surge of companies moving to Horgos happened because the city offers“the best” tax policies.
“There’ s a difference between Horgos and the Cayman Islands, but the advantage of capital gains is equally significant ,” he told the Global Times on Monday.
Zhao noted that it is a natural, reasonable development that film companies take advantage of tax breaks.
“If realistic conditions are met, there is nothing wrong with this, both for the government and the companies,” he said.
“You can say it’s a way of avoiding taxes, but it’s a reasonable way.”
Local officials have rejected allegations that the city has become a tax haven and instead maintained that the city offers many benefits to film companies.
“These companies are here to take advantage of various opportunities in Horgos to improve their competitiveness,” Wang told the forum on June 23, adding that the arrival of the companies could also improve the city’s image and support the local economy.
In addition to tax breaks, Horgos’ unique natural scenery and convenient transport system also attract companies, Wang Changtian, president of Enlight Media, told the same forum.
Furthermore, cross- border yuan services in Horgos could help companies make investments in overseas projects, Lü Jianmin, chairman of Spring Era Films, added.