893.5034 Business Tax/2: Telegram
The Minister in China (Johnson) to the Secretary of State
[Received February 16—10:10 a.m.]
71. 1. Following from American Consul General at Hankow:
“February 14, 3 p.m. The Consulate General has received from the Chairman of the Hupeh Provincial Government the provisional regulations governing the imposition of a business tax in Hupeh. Regulations provide inter alia for taxes on amount of capital or sales, inspection of account books, fines for refusal to pay taxes and other infractions of regulations, closure of business and arrest of proprietor at refusal to pay taxes or allow inspection of books, registration of firms with Bureau of Finance.
This office feels that inspection of books of American firms may well be refused in the light of portions of Legation’s circular 375 of October 3, 1929; and 69 October 30, 1930;17 and realizes that other features of regulations are objectionable but the physical ability of Chinese seriously to hamper or even possibly to close American firms failing to comply with the regulations is a possible eventuality. The imposition of fines on American companies has already been accomplished by the Chinese authorities, as reported by my despatch 1027 of August 12, 1930.18 The Chinese at the time averred their right to impose and collect administrative fines as opposed to judicial fines.
The Consulate General respectfully requests the Legation’s [instructions?] concerning the advice which it should give American firms vis-à-vis those parts of the regulations mentioned in this telegram.
Complete copies of the regulations will be forwarded to the Legation by mail. This office acknowledged to the Chairman the receipt of the regulations which will take effect March 1st.”
Hankow’s despatch No. 1027, August 12, 1930, referred to above, was transmitted to the Department with Legation’s despatch No. 417, August 23.18
[2.] Following reply transmitted to Hankow by the Legation:
“February 16, 6 p.m. Your February 14, 3 p.m. Provisional regulations for business tax appear clearly in violation of treaty rights of American citizens. Legation, however, is in agreement with your views concerning the practical aspect of the matter and has referred it to the Department for its instructions.
You should keep American firms fully informed as to the Chinese proposals and promptly report to the Legation any attempts of Chinese authorities to enforce measures against American firms.”
3. Japanese Legation states that about 2 weeks ago it instructed Japanese consular authorities to decline to notify Japanese merchants [Page 987] in Hunan of Chinese proposal to inaugurate business tax in that province and that the Legation will undoubtedly take the same attitude in respect to Hupeh regulations. Legation is endeavoring to ascertain attitude of the other Legations and will report further.
4. The Department’s instructions are requested.