File No. 893.512/45.
Minister Reinsch to the Secretary of State.
Peking , March 22, 1915 .
Sir: Referring to the telegram of July 20, in which the Legation brought to the attention of the Department the situation created by the Chinese authorities in imposing upon American goods certain inland charges considered to be irreconcilable with treaty stipulations, I have the honor to transmit herewith for the consideration of the Department an instruction on that general subject which the Legation addressed to the Consulate General at Shanghai under date of July 25 last, which but for a regrettable oversight would have been submitted to the Department at that time. In transmitting this instruction I have to report that the particular cases to which in refers have all, as is not infrequently the case with matters of dispute with the Chinese Government, come to an indeterminate conclusion—the [Page 217] particular causes of the complaint having disappeared but the Chinese authorities having conceded nothing.
Upon receipt of the Department’s telegraphic instruction of July 21, the Chargé d’Affaires took occasion to intimate informally both to the Minister for Foreign Affairs and to the Minister of Finance that the manifest effort of the Chinese Government to pare down to a minimum its obligations in the matter of inland taxation did not predispose our Government towards a feeling of confidence that it would, in the interests of its citizens, be justified in conceding such a liberal construction of treaty provisions as would be implied in the acceptance of the proposed stamp tax as applicable to its nationals. It should perhaps be added that neither of those Ministers showed any indication of concern at that intimation; and the Minister of Finance pointed out that, even if the nationals of the Treaty Powers were to ignore the tax, yet no doubt the Chinese parties to any contract potentially suable in Chinese courts would be sufficiently cautious to affix such stamps as might be necessary to insure the validity of the document under their national law; and (perhaps with a sound appreciation of the habit of mind which leads the Chinese to take no chances on anything) he seemed quite indifferent to the consideration that, in order to vindicate their contractual rights against foreigners, Chinese citizens would have to sue in consular courts which do not recognize the payment of a stamp tax as a condition of the validity of a contract.
Almost immediately after these informal representations the European war broke out; and in the midst of the preoccupations consequent upon it the various questions of inland taxation were for the time being lost sight of, both by the Chinese Government and by the Legation and the Consulates. On the resumption of more normal conditions, it appeared that the several causes of complaint in this matter had almost entirely ceased; and during the past six months or so the attention of the Legation has been drawn only infrequently and sporadically to cases of illegal taxation of that sort—either in the form of destination taxes (of the nature indicated under the fifth heading of the instruction of July 25 to Shanghai) or in the form of so-called boat-taxes which are in fact transit taxes levied upon the value of the cargo.
Whether the Chinese Government has been convinced of the illegality of its action, or has appreciated the inexpediency of trying to force a perverted construction of the treaties, or has desired to conciliate the United States and Great Britain for political reasons, or has realized the futility of exactions that throttle the trade from which they are derived, or (as is most likely) has yielded to the opposition of the Chinese merchants whose trade was threatened by such exactions—whatever the reason, it appears that for the time the various obnoxious laws of this character are in abeyance and there is a lull in the effort to evade the exemptions stipulated in the treaties.
I cannot, however, feel that this respite is permanent, but anticipate that, as has so often happened before, there will eventually be a renewal of the mistaken policy of trying to shift the burden of taxation onto the foreigners by one or more of the familiar, equivocations as to the meaning of the treaties. With a view to that probability, [Page 218] I beg to request an expression of the views of the Department on the several points discussed in the instruction of July 25 last to Shanghai, in order that the Legation may be in a position to instruct the various Consulates as to the attitude which they should adopt in the event of any of these questions arising in their districts. I reserve for future discussion, at a time when the issues involved may again become practical, certain recommendations as to a possible adjustment of the questions treated in the enclosed instruction to Shanghai, and of the related questions of Stamp Tax, Excise Tax, etc.
I have [etc.]