Shah Rukh Khan may be king in Bollywood, but when it comes to Bollywood shows in the United States the only monarch is quite literally cash. The reason for that is simple: Both the film stars and promoters of these shows find it useful to have wads of bills to avoid the taxman — and shore up the thin profit margins that the shows earn.
In the past, foreign performers at these events in the US were not required to pre-pay taxes on their earnings in this country. A few years ago a suspicious US Internal Revenue Service started looking into “the complex structures” set up by the foreign entertainers and their agents.
Towards the end of 2007, the IRS mandated that the group managing the contract for an event would have to deduct 30 per cent of the performer’s payment and deposit the amount with the US Treasury. Only after the certificate of withholding was shown to the venue managers could an event proceed.
The withholding tax is now cited by promoters of such shows as the South Asian Carnival, the US events to which Shah Rukh Khan was headed when he was recently detained in Newark airport, as evidence that their finances are on the straight and narrow.
Rajender Singh, the national promoter for the carnivals, says: “We applied for the P-3 visa for him. As per procedure, before the visa was issued, they checked the records of my company, Star Promotion, including tax records and history. We run a clean business.”
However, speaking off the record, those who have been involved in or have closely observed the Bollywood shows trade in the US, make it clear the financial transactions behind these shows are often clandestine.
One person who recently returned from Mumbai says, “I received a call from the representative of a major star we’re working with and was told to write a cheque for $2000 to her sister in New Jersey.” And this was not even for a performance, according to the source, it was just to “maintain a relationship” with the star.
That is often one way to sidestep the regulations — payments are made to relatives or agents of performers. As the source disclosed, “We used to give cash, $5000 here, $7000 there, and show it as petty cash expenditure. We’d worry about it if we got audited.”
The revenue shown from gate receipts may also be tweaked.
On their websites where tickets are advertised for sale, especially for the VIP and VVIP categories, organisers usually only provide a contact telephone number. According to insiders, since the denomination of the tickets is rarely printed, a ticket sold for $500 could go into the books as a sale of $35.