894.0144/14
The Consul General at Mukden (Pontius) to the Secretary of State
[Received June 22.]
Sir: Supplementing my No. 19, dated February 9, 1920 (File No. 370) in reply to Department instruction No. 77 dated November 22, 1919 (File No. 894.0144/12), written in further connection with the action of the Japanese railway authorities in attempting to levy an income tax for municipal purposes on American citizens in the Japanese settlement at Mukden, I have the honor to report herewith further developments in this regard.
Several weeks ago the local Japanese Vice Consul called upon me and stated that the Japanese Government and the South Manchuria Railway authorities were very anxious to settle the question of collecting “taxes” in a uniform manner from all foreign residents in the railway settlement at Mukden. When asked to submit a [Page 29] proposal of the manner of levying and for the collecting of the assessments, he offered the suggestion that the matter be solved by us instead. I then requested him to supply me with a scale of the so-called income tax rates levied on and collected from Japanese (and other) residents in the settlement. The schedule of rates has just been given me and for the information of the Department is quoted hereunder:
Scale of Tax Rate Paid by Residents in Japanese Railway Concession
| Class | Monthly income | Amount imposed in one year | Amount imposed in one term (three months) |
| Special | Yen 1,000. (and up) | Yen 435. (and up) | Yen 108.75. (and up) |
| 1st | 800. | 315. | 78.75 |
| 2nd | 650. | 243. | 60.75 |
| 3rd | 550. | 195. | 48.75 |
| 4th | 475. | 159. | 39.75 |
| 5th | 400. | 123. | 30.75 |
| 6th | 350. | 105. | 26.25 |
| 7th | 300. | 87. | 21.75 |
| 8th | 275. | 78. | 19.50 |
| 9th | 250. | 69. | 17.25 |
| 10th | 225. | 60. | 15. |
| 11th | 200. | 51. | 12.75 |
| 12th | 175. | 43.20 | 10.80 |
| 13th | 150. | 35.40 | 8.85 |
| 14th | 125. | 27.60 | 6.90 |
| 15th | 100. | 19.80 | 4.95 |
| 16th | 80. | 15. | 3.75 |
| 17th | 65. | 11.40 | 2.85 |
| 18th | 50. | 7.80 | 1.95 |
The Japanese consular authorities clearly understand that the collection of an income tax levy from Americans residing in the railway settlement is entirely out of the question, and the schedule was desired merely to aid in arriving at some equitable manner of assessment. The Japanese Vice Consul assured me that all of the receipts under this heading were expended in policing, street lighting, road repair, water supply, fire prevention, and the like, and that it was levied upon all classes without discrimination. All Russian residents were paying this tax. The Vice Consul urged that the local foreign merchants elect a committee in order that the question could be gone into without any further delay, and that it was desired that the assessments be paid direct to the Japanese authorities.
[Page 30]As none of their nationals reside in the railway settlement the local French and British Consuls are not at all anxious to take any active part in the present situation, and under the circumstances the matter therefore is one for the Americans to adjust. As already reported to the Department, the only Americans concerned are the Standard Oil Co. and its employees, and I have the honor to report the results of an interview had with the manager of that firm. The manager agrees with me that any “contribution” towards the public expense of the municipality could best be assessed upon the rental value or payments, and that a fair levy would be a 12% assessment—the same as collected in the International Settlement at Shanghai. The manager of the Standard Oil Company is of the conviction that the contribution in the nature of assessments should be transmitted to the Japanese authorities through this Consulate-General, basing his contention as he states on the attitude adopted by the Department in connection with the railway settlement difficulties existing in Harbin. The reasonableness of the rates and the manner of levying the assessments once agreed upon, I think it would be more expedient for the Americans concerned to pay the contribution direct to the proper Japanese authorities. Such action would obviate any chance of this office directly or indirectly assuming any responsibility in this regard. That the conditions at Mukden are somewhat different from the situation at Harbin is apparently evident from the quotation hereunder taken from an instruction sent by the Acting Secretary of State to the American Legation at Peking under date of January 7, 1910:24
“An examination of the report upon Japanese jurisdiction in Manchuria to which you refer fails to show that the South Manchurian Railway is allowed to exercise any political powers, but that ‘subject to the Government’s permission’ it makes ‘arrangements for engineering works, education, sanitation, etc. within the areas of land belonging to the railway and may collect fees from residents thereon.’ The truth of this statement is confirmed by an examination of the Government Order in the matter. (See Rock-hill’s Treaties, etc., Vol. II, page 191).
The Imperial Ordinances relating to the government of the leased territory of Kwantung indicates that the police administration over the railway areas is under the control of this Kwantung-general government and not that of the railway company. On the other hand, as you are aware, Mr. Straight’s No. 207, of February 22, 1908,25 enclosed a translation of certain regulations concerning Branch Councils in places along the railway, which put the administration of the settlements in the hands of the railway [Page 31] company. It may be urged, however, that the South Manchurian Railway is practically a Government railway and that its status is therefore different from that of the Chinese Eastern Railway Company, which is purely commercial and which has been created by a private organization—the Russo-Chinese Bank—itself subject to Consular jurisdiction in Manchuria.”
The Department in its instruction No. 77, as referred to in the foregoing, expresses the view that the United States Government would want to be consulted as to the reasonableness of the rates and the manner of levying and collecting the assessments. The attitude of the Japanese authorities seems to be that if the American residents will not pay the income tax, what are they willing to pay? The reply so far as the local Americans are concerned, is a contribution based on an assessment of 12% on the rental value or payments. This contribution would apply to firms as well as individuals. In this connection I might mention that the Japanese authorities attempted to levy an assessment of 25,000 gold yen (which was later reduced to 10,000 gold yen) on the “income” of the local branch of the Standard Oil Company which has its offices in the settlement, but even any discussion of the matter was flatly refused. In no case has any tax been paid to the Japanese authorities so far as the employees of the Standard Oil Company are concerned. In my opinion, the Japanese authorities have little right in contending that the “contributions” should be based upon monthly income, for the simple reason that the American residents do not enjoy all of the benefits the Japanese derive—that a good share of the receipts are very likely directed to such uses as are of no benefit to the Americans concerned.
The Japanese Consul General has been informed of the proposal in this connection, and also clearly notified that the proposal must be submitted to the Department of State for its approval. The Japanese Consul General is likewise referring the matter to the South Manchuria Railway authorities. A copy of this despatch is being sent to the Legation at Peking.
I have [etc.]
- Foreign Relations, 1910, p. 227.↩
- Not printed; Willard D. Straight was consul general at Mukden 1906–9.↩