693.116/104: Telegram

The Minister in China (Johnson) to the Secretary of State

799. Legation’s 790, October 4, 3 p.m. Following from Consul General, Canton, to Legation and Nanking:

“October 14, 6 p.m. Referring to my telegram of October 3, 3 p.m. After repeated efforts [to] expedite a reply to our proposals, I was informed yesterday by Inspector General that, although Bureau of Reconstruction had completed its draft, final approval must await the views which had been sought of the Provincial Commissioner of Finance on the business tax question. With a view to hastening matters British Consul General and I with the approval of the Inspector sought and obtained an appointment with Finance Commissioner this morning.

Commissioner denied that the matter had been referred to him at all and could only tell us that his Bureau proposed shortly to institute a ‘business tax’ of $3 local currency per case of imported or locally refined kerosene to be collected from retailers. We told him we were not concerned with taxation upon locally refined kerosene provided there was no discrimination against foreign firms, but we pointed out that such a tax upon imported kerosene was contrary to the undertaking given by Minister Soong to the Standard Oil Company that no tax over and above the regulating import duties would be imposed upon imported kerosene, as well as to the undertaking given by the Chinese Government that upon gaining customs autonomy taxes akin to likin would be abolished. He said he had received instructions from the Minister of Finance not to impose any taxes on foreign oil companies or their factories or sales agents but that this instruction did not apply to taxes upon retailers. As our further arguments apparently had no effect we left after stating that we would refer the question to our Legations. The Legation making representations to the Central Government may consider it advisable to ask that instructions be issued to Canton regarding this tax in respect to imported kerosene.

Subsequent to foregoing interview I communicated with Inspector General who promised to ask Reconstruction Bureau for an explanation of the discrepancy between its statement and that of the Financial Commissioner. It seems probable that the local authorities are trifling with us and possibly also with Inspector. Until we hear [Page 589] from Inspector there would appear to be no further action we can take.”

The Legation does not contemplate representations to the Foreign Office regarding proposed “business tax” until informed that it has actually been instituted.