The Consul General at Canton (Jenkins) to the Chargé in China (Mayer)41
Sir: I have the honor to refer to my telegrams of September 27, 10 a.m.,42 September 28, 9 a.m., and September 28, 12 a.m.43 concerning the declared intention of the Canton regime to levy so-called consumption and production taxes on all merchandise passing through the maritime customs at this port, the proceeds therefrom to be used in compensating the strikers connected with the anti-British boycott.
It will be recalled as already reported telegraphically by this Consulate General, that the Canton régime has informed the British Consul General officially that arrangements have been made to end the anti-British boycott before October 10, and that properly constituted Chinese authorities would levy special taxes on imports and [Page 864] exports. The tax on ordinary imports will be two and a half percentum, ad valorem, according to the notice, and five per centum on luxuries. Exports are also to be taxed according to the new plan, but the amount has not yet been definitely stated, although it is understood it will be at the rate of two and a half percentum.
These taxes are to be known as consumption and production taxes and to this extent should not be confused with import and export duties. Although it is understood the new taxes are to apply to all commodities regardless of nationality, no consular representative other than the British has yet received any official intimation from the local authorities and the Consular Body as such has not considered the matter.
It is understood that the Cantonese contemplate using the so-called Customs Memo for valuation purposes, although the Customs authorities are not to take any part in the actual collection of the new taxes.
It is evident that the Cantonese authorities intend to levy these taxes regardless of protests from the Powers concerned. It is also equally clear that once these taxes are applied they will be continued indefinitely. In a conversation with Mr. Eugene Chen, so-called Acting Minister of Foreign Affairs, the writer of this despatch was informed that the Cantonese régime expected to raise $500,000, Canton currency, monthly through the new taxes, the money to be paid over as collected to the strikers, who would then be expected to find other employment. When questioned as to what would be done about the tax after the strikers had been paid, Mr. Chen said this question had not yet been decided, but the taxes would probably be continued indefinitely if the Government found it expedient and necessary to do so.
The Acting British Consul General, Mr. Brenan, is frankly in favor of allowing the Cantonese régime to institute the new system of taxation without objection on the part of the Powers. Mr. Brenan believes that the Powers are not in a position to do more than file the usual protests and since these would have no effect, he thinks an effort should be made to regularize and control the collection of the taxes through the existing machinery of the maritime customs.
Colonel Hayley Bell, the Commissioner of Customs, is of the same opinion, and a copy of a private letter just received from him by the writer of this despatch is enclosed herewith for the information of the Legation.48 Colonel Bell draws attention to the fact that the local government probably intends to use the existing picket machinery [Page 865] for the collection of the new taxes. He points out that if this is not done the present system of extortion, intimidation and illegal interference with foreign trade may be expected to continue indefinitely. For these reasons, Colonel Bell believes that the Powers should endeavor to induce the Cantonese régime to consent to the collection of the taxes through the customs with the understanding that the money will be paid over at stated intervals to the Cantonese régime, instead of being sent on to Peking.
The writer of this despatch is strongly inclined to agree with the views of Colonel Bell and Mr. Brenan. It scarcely seems likely that the Powers will agree to do more than protest against the proposed taxes and if this should prove to be the case, the Cantonese authorities will disregard the protests and proceed as though nothing had happened. They have done this repeatedly during the past year or two and say quite frankly in private conversation that mere protests from the Powers will not influence them in any way whatever.
The scheme hinted at with respect to the collection of the new taxes although quite indefinite as yet, appears to follow the general plan suggested by the Washington Conference, and there should be no objection apparently to the taxes as such, but merely to the fact that they are being put on by an unrecognized government and without the concurrence of the Powers concerned.
It seems highly desirable, in view of the existing circumstances, to endeavor to arrive at some plan by which these proposed new taxes may be collected through the maritime customs and paid over to the Cantonese régime. At the same time, however, it is recognized that when this is done, the rights of the Powers generally to supervise the customs’ tariff and the administration of the maritime customs should be preserved as far as possible. It is not certain that the Cantonese régime would consent readily to the collection of the taxes through the customs, but if the Powers are firm, the writer of this despatch is inclined to believe some arrangement as outlined above could be effected.
It would be a fatal mistake in the opinion of the writer merely to protest against the institution of the taxes and then permit the Canton régime to proceed as though the Powers took no further interest in the matter. The so-called Nationalist Government is now far stronger than it has ever been in the past and the Powers must find some means either to prevent its growing interference in our trade rights or to control and regularize its activities in the interests of all concerned.
I have [etc.]