The Consul General at Shanghai (Cunningham) to the Minister in China (Johnson)38

No. 6639

Sir: I have the honor to transmit a copy of a letter dated July 10, 1930, addressed to the Senior Consul by the Minister of Finance39 in reference to the enforcement of the excise tax on cigars and cigarettes in the Settlement. The Minister of Finance points out that it is unfair to the honest manufacturer, who pays the tax voluntarily, that others are allowed to evade it simply because of the inability of the Tax Bureau to enforce payment in the Settlement. He seeks the assistance of the Consular Body and the International Settlement authorities in preventing cigarettes on which the excise taxes have not been paid from being sold in the Settlement and from being smuggled from the Settlement to Chinese territory.

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In order that a statement might be secured from the Municipal Council as to its attitude in the matter a letter was addressed to the Director-General and there is enclosed a copy of his reply, dated July 25, 1930.39a His reply is interesting because there is attached thereto a memorandum prepared by Major Arthur Bassett,39a on behalf of the British-American Tobacco Company and other concerns, which have an agreement with the Excise Tax Bureau in regard to the payment of taxes. It is also interesting in that it gives an expression of opinion of Mr. Justice Feetham,40 who is here studying the various problems in order that the friction existing between the foreign administered and the Chinese administered territory might be minimized. The Senior Consul has had conversations with various persons, including Mr. Justice Feetham, who is very strongly in sympathy with the Minister of Finance, and has learned that there is no particular opposition on behalf of the International Settlement authorities to entering into an agreement which will assist the Minister of Finance in attaining the object which he desires. The matter will be considered next week by the members of the Consular Body and it is hoped that the Legation will telegraph any instructions or suggestions which it is desired that this Consulate General should observe, immediately upon the receipt of this despatch. It is not believed that there will be any objections on the part of the Consular Body to a conference of the Municipal Council’s representative, a representative of the Excise Tax Bureau and one from the Senior Consul for the purpose of finding some method of assisting the Minister of Finance. In this matter I am in complete sympathy with the request of the Minister of Finance.

A branch office of the Tobacco Tax Bureau has been located within the Settlement for a considerable period, permission to establish the same having been granted upon the personal application of Mr. T. V. Soong, the Minister of Finance, directly to the Municipal authorities, and the then Chairman of the Shanghai Municipal Council approved the application under what he termed a “Gentlemen’s Agreement.” One of the contributing arguments in favor of the granting of such permission was the fact that the location of a branch office within the Settlement would be a great convenience to the foreign cigarette manufacturers. This office is informed by the Municipal authorities that the Tobacco Tax Bureau has at no time even attempted to contravene any Municipal regulation.

It is respectfully requested that a telegram be despatched as early as possible containing the Legation’s instructions for my guidance at the proposed Consular Body meeting which will take place during [Page 292] the coming week. It is particularly important that this matter be concluded before my departure on leave of absence on October 10, 1930.

I have [etc.]

Edwin S. Cunningham
  1. Copy transmitted to the Department by the Consul General in his covering despatch No. 7172, September 26, 1930; received October 22.
  2. Not printed.
  3. Not printed.
  4. Not printed.
  5. Mr. Justice Richard Feetham, of the Union of South Africa.