File No. 893.512/53.
Chargé MacMurray to the Secretary of State.
Peking, July 12, 1915.
Sir: I have the honor to submit herewith for the consideration of the Department a copy of an instruction which the Legation is addressing under today’s date to the Consulate General at Hankow, in reference to a so-called “99 Mercantile Tax” which the provincial authorities of Kiangsi have attempted to establish. This tax is fixed at 1 per cent on the current price of goods of all kinds entering [Page 225] the Province of Kiangsi, and is declared to be “for the purpose of adjusting the value of the cash notes and assisting the financial position of this province”; and it is further provided that “the tax will be withdrawn as soon as all the cash notes have been redeemed.” Complaint against the proposed levy of this tax upon its products was made by the Kiukiang branch of the Standard Oil Company of New York, which, for the purpose of avoiding certain charges of the Maritime Customs for the bonding of warehouses, is accustomed to take its products into the interior of Kiangsi, not under the system of transit-passes provided by the treaties but under an arrangement for the payment to the Native Customs of a provincial tax known as “Pao Shang Piao,” which, for the same half-duty charge as the transit pass, assures to the goods while in transit in the province the same general exemptions from local taxation as does the transit pass. The exact nature of this Pao Shang Piao is unknown, as the Consulate General has been unable to procure a copy of the Regulations; but what appears to be the point most essential in this connection is covered by the following quotation from a communication on the subject which the Governor of Kiangsi addressed to the Consulate General on January 12 last:
The Pao Shang Piao was established in the twenty-ninth year of Kuang Hsu (1903–1904) and has been collected after the manner of the Maritime Customs tax. It is collected once for all by the Pao Shang Office, and the office issues a tax-receipt permitting that the goods be shipped to their destination (at the point of destination). When the goods and certificate are in accord, the certificate will be given to the office for cancellation. The goods will not be taxed a second time.* * * The goods which are covered by Pao Shang Piao and are imported into the interior through Hukow, shall not be interfered with, detained or further taxed by either the Hukow or other interior tax offices.
It was contended by the Standard Oil Company that the payment of this provincial tax, which is closely analogous to the transit-pass tax established by the treaties, should similarly entitle them to exemption from “all other inland charges whatsoever,” as the treaties provide in favor of transit-pass goods. In accordance with this view the Consulate General refused to recognize the legality of the tax, and so advised the American company. The British Consul at Kiukiang, apparently on the same grounds, advised his nationals in the same sense.
Although concurring in the conclusion that the “99 Mercantile Tax” is illegal as imposed upon goods that have paid Pao Shang Piao, the Legation nevertheless considers that its illegality arises not from any violation of the treaty stipulations in regard to transit-pass exemptions, but from the fact that the effect of payment of the Pao Shang Piao, as stated by the Governor in the communication quoted above, should be to relieve the goods from the incidence of all other local levies while in transit in the Province of Kiangsi.
I beg to request an expression of the views of the Department on the several questions thus raised.
I have [etc.]