Hor­gos is no longer a ‘tax haven’

China Daily (Hong Kong) - - CHINA - By CUI JIA cui­jia@chi­nadaily.com.cn

Hor­gos, a small and young city in the Xin­jiang Uygur au­ton­o­mous re­gion, will no longer be a “tax haven” for com­pa­nies that take ad­van­tage of the city’s pref­er­en­tial poli­cies on tax ex­emp­tion, as the city has been tight­en­ing up re­quire­ments for busi­nesses that are el­i­gi­ble for the poli­cies.

“Even the com­pa­nies that run busi­nesses to help other com­pa­nies reg­is­ter in Hor­gos have closed. The good times are gone,” said Luo Sheng­hao, an im­port and ex­port busi­ness­man who gave up his part-time job help­ing other do­mes­tic com­pa­nies reg­is­ter in the city.

Luo started his job on the side in Novem­ber 2016 when there were many com­pa­nies run­ning such busi­nesses in Hor­gos, which bor­ders Kaza­khstan and only be­came a county-level city in 2014. Many of their clients were film and me­dia pro­duc­tion com­pa­nies owned by movies stars and fa­mous direc­tors. With the help of those com­pa­nies, they can com­plete the reg­is­tra­tion process within a month with­out show­ing up, he said.

“Those com­pa­nies are flex­i­ble with of­fice space and per­son­nel, so they re­act to fa­vor­able poli­cies more than com­pa­nies in other sec­tors do. More im­por­tant, Hor­gos’ of­fer was too good to miss,” Luo said. “Many peo­ple first no­ticed the city when they watched the cred­its at the end of the movies as many pro­duc­tion com­pa­nies’ names of­ten con­tain Hor­gos. Peo­ple then started to call the city ‘Hor­ly­wood’.”

A com­pany reg­is­tered in Hor­gos be­tween 2010 and 2020 could en­joy tax ex­emp­tion for the first five years and have a tax re­fund for an­other five years, since the city was des­ig­nated an Eco­nomic De­vel­op­ment Zone by the cen­tral govern­ment.

Ac­cord­ing to Tianyan­cha.com, a busi­ness in­quiry ser­vice provider, the city has at­tracted 1,662 com­pa­nies from the film and me­dia pro­duc­tion sec­tors in the past five years.

“Start­ing Jan­uary, the lo­cal govern­ment started to tighten up re­quire­ments for busi­nesses that are el­i­gi­ble for such poli­cies be­cause many com­pa­nies, es­pe­cially those film and me­dia pro­duc­tion com­pa­nies, didn’t ac­tu­ally con­trib­ute to the lo­cal econ­omy at all,” Luo said.

The Hor­gos govern­ment now re­quires com­pa­nies that wish to en­joy the poli­cies to have a cer­tain size of of­fice space and num­ber of staff mem­bers. It also blocks com­pa­nies from shar­ing one reg­is­tra­tion ad­dress and those that have no in­ten­tion of in­vest­ing in the city, ac­cord­ing to the Hor­gos in­for­ma­tion de­part­ment.

For film and me­dia pro­duc­tion com­pa­nies, the sit­u­a­tion got worse af­ter fa­mous Chi­nese ac­tress Fan Bing­bing, who also owned an en­ter­tain­ment com­pany in Hor­gos, was in­ves­ti­gated for huge tax eva­sion in early June. More than 100 such com­pa­nies have an­nounced the clo­sure of their busi­nesses in Hor­gos since June, China Cen­tral Tele­vi­sion re­ported.

“Those com­pa­nies are no longer qual­i­fied for pref­er­en­tial poli­cies so there is no point for them to stay. Also, Hor­gos has be­come a big tar­get for tax­a­tion au­thor­i­ties,” Luo added.

He be­lieved that Hor­gos can still be Hor­ly­wood af­ter the city plans to build more stu­dios so those com­pa­nies can ac­tu­ally pro­duce there.

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