New rules have been introduced in China to prevent cinemas from engaging in fraudulent activities, such as manipulating box office figures.

The State Administration of Press, Publication, Radio, Film and Television, China's movie watchdog, confirmed on Wednesday that it has issued a circular with new rules to prevent box office fraud.

Earlier this month, the administrator issued a standard that defines how movie ticket sales should be managed to prevent theaters from avoiding tax payments. Many theaters have reportedly been falsifying the number of movie-goers and reporting artificially reduced ticket sales to avoid taxes.

According to the circular, film distributors should conduct routine inspections of theaters and report those that violate the rules. Persistent or severe offenders may have their licenses revoked.

These acts of fraud are often facilitated through the use of illegal ticketing software to report falsified box office sales. The circular said all ticketing software must be upgraded before May 1; disqualified software will not be allowed. An upgrade to the national digital ticketing platform will be completed by that date and all commercial cinemas must upgrade or face being banned.

China has made rapid progress in developing the film industry in recent years.

In 2013, box office sales neared 21.8 billion yuan ($3.6 billion) and domestic films raked in about 12.8 billion yuan, a year-on-year increase of 54.3 percent.

But industry experts believe that real box office sales are at least 10 percent higher than reported. Reporting falsified box office sales, they say, has greatly affected tax revenue from theaters.

Yin Hong, professor at Tsinghua University, said it is now common for cinemas in smaller cities to report underwhelming box office sales to avoid paying taxes.

"Box office fraud will lead to disorder in the film market and to vicious competition that will ultimately affect people's viewing pleasure," Yin said.

Wang Changtian, president of film company Enlight Pictures, said if film distributors are not making any profits, they will have no funds to make more movies.

Yin suggested harsher punishments for cheating cinemas and incentives for city government departments to supervise cinema operations.

"The standard in theater management can be further improved this year," said Zhang Hongsen, a senior official with the administration.

(China Daily USA 01/23/2014 page5)