Papers Relating to the Foreign Relations of the United States, 1926, Volume I

893.512/440

The Consul General at Canton (Jenkins) to the Chargé in China (Mayer)⁶²

Canton, October 8, 1926.

No. 545

Sir: I have the honor to confirm my telegram of October 7, 10 a.m.,⁶³ concerning the determination of the so-called Nationalist Government to begin collection on October 11 of the new consumption and production taxes and to enclose a copy of a note dated October 6 from the Acting Minister of Foreign Affairs. It will be observed that the mandate quoted by Mr. Eugene Chen refers to these taxes as temporary and provides that they shall be applicable on such articles as are subject to trade between the Liang-Kwang Provinces and other provinces in China and foreign countries.

According to Mr. Chen, these taxes are to be collected by officers appointed by the Ministry of Finance and are not to be considered in any sense as Customs duties. Mr. Chen intimates, however, that if the maritime customs service would lend its assistance possible friction and misunderstandings might be avoided. It is understood that the Ministry of Finance contemplates using so-called customs memos as a basis for levying these taxes and if the Commissioner of Customs declines to permit the carrying out of this plan, the Treasury Department’s appointees will probably experience considerable difficulty in fixing values on merchandise coming in and going out.

As already explained in reports from this Consulate General, Colonel Hayley Bell, the Commissioner of Customs, is afraid that if the collection of these new taxes is permitted to go unchallenged, other provinces will soon follow suit and in the course of time, there will be no limit on these so-called production and consumption imposts levied on merchandise passing through the Customs. Colonel Bell fears also that the very existence of the maritime customs service will be endangered. He is still hopeful that the Powers concerned will either decide to prevent the Cantonese from levying the taxes or will insist that the entire matter shall be administered through the customs service.

According to the Canton Gazette, the cooperation of the maritime customs desired is indicated in a letter addressed to the Commissioner of Customs by the Chinese Superintendent of Customs who states that “further with reference to the collection of the new consumption and production tax, I wish to reply to your specific questions as follows:

• “1. A tax will be levied basing on the Customs Tariff, unless for any technical reason such would prove unsatisfactory in which case an effective two and a half per centum and five per centum will be charged for general articles and luxuries respectively.
• “2. The Ministry of Finance would prefer, if possible, to borrow a room or rooms in the Customs Building for the use of a small staff to carry on the collection of the new taxes, which would facilitate the work of both the Ministry and the Customs Administration.
• “3. The tax will come into operation commencing October 11th, 1926, or as near that date as possible.”

I have [etc.]

Douglas Jenkins

[Enclosure]

The Chinese Acting Minister of Foreign Affairs at Canton (Chen) to the American Consul General (Jenkins)

Canton, October 6, 1926.

Sir: I have the honour to communicate to you the following translation of a Mandate issued by my Government on October 4:

• “1. The Ministry of Finance is hereby instructed to levy a temporary internal tax on the consumption or the production of such articles as are subject to trade between the Liang–Kwang provinces and the other Provinces in China and foreign countries.
• “2. The rate of taxation shall be equivalent to half the usual Maritime or Native Customs Tariff (as the case may be) on general articles and to a full tariff on articles of luxury, such as silk, silk stuff, toilet articles, fur and leather, articles of decoration, gems and precious stones and similar goods. Cigars, cigarettes, imported wines, kerosene and gasoline which are the subject of other special taxes are exempt from this tax.
• “3. The Ministry of Finance, for purposes of convenience, may collect such taxes at or near the various Maritime and Native Customs barriers, and is instructed to make detailed regulations governing the collection of the said tax.
• “4. Any person selling or buying or otherwise dealing with articles on which the said tax has not been paid, shall be liable to a term of imprisonment not exceeding three years and/or a fine equivalent to ten times the value of the article or articles, which shall also be confiscated.
• “5. This Mandate shall come into effect on the 11th October, 1926.”

It seems desirable to emphasize the fact that the new tax is, in principle, an internal tax to be distinguished from the imposts levied as Customs duties under the Chinese Maritime Customs system. There is of course no intention to interfere with the latter as at present administered, though possible misunderstanding and friction would be avoided if Maritime Customs cooperation should be available in the collection of the new tax by the fiscal authorities to be appointed by my Government.

I have [etc.]

Chen Yu Jen

62. Copy transmitted to the Department by the consul general as an enclosure to his despatch No. 685, Oct. 8; received Nov. 9.
63. Not found in Department files.