The Consul General at Mukden (Baker) to the Secretary of State
Sir: I have the honor to refer to my despatch of February 6, 1919 which was transmitted to the Department with Legation despatch No. 2615 of March 31st last and to quote the following excerpt from the Legation’s despatch to this office No. 4588 of August 1st:56 [Page 452]
“I have to enclose for your information a copy of instruction No. 992 of the Department of State dated June 3rd dealing with the attempt of the Japanese authorities to levy an income tax and other matters. As the Department makes no definite ruling on the income tax it is desirable that you should report fully to it concerning this particular matter and ask a specific instruction as to whether or not Americans are to pay this tax in the future.”
The facts in this case are very simple and the issue is very clear. Mr. Grey’s letter transmitted with my despatch above mentioned describes the situation very well. There is not much to add excepting one or two details as to the amounts which the Japanese have tried to collect. That the levy is in the nature of an income tax admits of no question. Members of the Standard Oil Company, for instance, were assessed according to their several incomes. Mr. Grey was charged about forty-four Gold Yen per quarter, Mr. Callahan, whose salary is somewhat less, was charged about thirty Yen for the same period and others were charged in proportion. Mr. Shrap, the American Manager of the Shanghai Life Insurance Company, received a quarterly bill for about thirty-five Yen although he paid no rent and did not even live in a rented house and did not own any real property in the Japanese Concession. He was residing in the Yamato Hotel, which is owned and operated by the South Manchuria Railway. This income tax appears to be a general imposition which the Japanese are trying to levy and it is intended to defray the municipal expenses mentioned in my despatch of February 6th. As explained therein there seems to be no reason why Americans should not contribute something toward the maintenance of the settlement in which they live. It is the form of the tax rather than the tax itself which is most objectionable.
I enclose herewith a copy of my despatch of May 19th in this regard which was sent to the Japanese Consul General and also transmit a copy of his reply of August 8th together with the enclosure which he mentions. From the last mentioned document it appears that the Japanese consider the tax in the nature of “municipal rates” which are collected in British and other concessions in China and that the manner of assessment is more or less incidental and is determined by the financial ability of the persons assessed. The following quotation therefrom harmonizes with Mr. Grey’s statement of the case:
“Further the rate of imposition is assessed according to the residents’ individual economical capacity and such capacity having been carefully investigated by the local director of the administrative office in each district is reported to the head-quarter[s] of the company which decide the rate and class of such imposition taking the reports and other conditions into consideration.”
As suggested on page three of my despatch of February 6th it seems desirable that the Japanese and American authorities come to some understanding about this matter so that the local officials concerned may know exactly where they stand and to what extent they will be supported in their contentions.
I have [etc.]
- Legation’s despatch No. 4588 not printed.↩