893.5034 Business Tax/93: Telegram

The Chargé in China (Gauss) to the Secretary of State

543. In its despatch 3154, November 21st34 regarding business tax law the Legation reported receipt of a further note from the Foreign Office making unsatisfactory effort to overcome objections previously voiced by the American Government and requesting that American merchants be instructed to comply with the regulations and pay the tax. Other interested Legations received similar notes.

As for the most part the objections previously raised still existed, the Legation replied to the Ministry of Foreign Affairs to that effect and reaffirmed its previous position. French Legation has replied refusing to permit imposition of this tax upon French nationals for the reason that it is in contravention of the treaties particularly article 40 of the French treaty of 1858.35 British Minister was in South China and Japanese Legation did not know what reply would be made.

I am now informed by the British Legation that the British Minister is proposing to his Government that he be authorized to go to the Chinese Foreign Office and verbally and informally explain that the British Government is prepared without prejudice to treaty rights to discuss an arrangement for the payment by British subjects of a legal and reasonable business tax on a nondiscriminatory basis; that is to say, subject to there being no discrimination whatever either in theory or practice, such tax to be paid not only by the Chinese but also by all foreigners alike, and subject also to certain safeguards, the chief of which would be that such legal taxation would not be enforced against British subjects by any other process than that of action in the British courts, and that in cases of disputed assessment the party concerned should be entitled to have the amount of his liability fixed by the British courts. British Legation states that it is not informing [Page 571] other interested Legations of this proposed action at the present moment but that it desired to obtain our views and agreement to a similar line of action.

By making this counterproposal to the Chinese the British Minister hopes to shelve the entire question as would appear to have been done with the commercial treaty negotiations36 and thereby possibly prevent further provincial efforts to collect a tax under the present objectionable law or at least restore relations by exhibiting to the Chinese the willingness of the British Government to permit imposition of a business tax upon British subjects under certain safeguards.

Provided there is insistence upon nondiscrimination as between foreigners of various nationalities as well as between foreigners and Chinese the suggested action would appear harmless and I would recommend that I be authorized to take similar action through the Counselor at Nanking provided British Minister is authorized to act as he has suggested. Our action might be confined to informing Chinese verbally that we endorse the British proposal. The Department’s instructions are requested.

  1. Telegram in two sections.
  2. Not printed.
  3. Signed at Tientsin, June 27, 1858, British and Foreign State Papers, vol. li, p. 636.
  4. See pp. 523 ff.