893.5123/10: Telegram

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

224. Your 401, August 11, 4 p.m.; 430, September 3, 2 p.m.; 436, September 5, 1 p.m.; and 444, September 12, 3 p.m.,78 in regard to the Chinese income tax law.

1.
The Department, in its instruction No. 405 of May 22, 1923,79 stated, in regard to taxation in China, that between the extremes presented by the French Treaty of 1858 (the provisions of which accrue to American nationals by virtue of the most-favored-nation clause in American treaties with China), and our treaty of 190380 an equitable medium might be found which would allow a reasonable exercise by China of the ordinary sovereign rights in fiscal matters, and at the same time prevent abuse of power through the imposition of undue [Page 631] burdens upon foreigners residing or doing business in China. Having in mind the concluding clause in the preceding sentence in relation to the character of the Chinese income tax, the Department feels that it would not be advisable or practicable to reply to the Foreign Office in the sense recommended in your telegram of September 3, 2 p.m.
2.
In view of the character of the income tax, its high rates on average incomes, the difficulty of orderly and impartial administration, and considerations connected with the collection of the tax from American nationals, the Department at this time is disinclined to indicate approval, even by implication, of the income tax regulations in their present form or conditional acquiescence in their application to American nationals.
3.
The Department desires therefore that you inform the Chinese Foreign Office, in reply to its note of August 25, enclosing copies of the provisional income tax regulations, that the regulations cannot be considered applicable to American nationals.81
Hull
  1. Telegram No. 444 not printed.
  2. Foreign Relations, 1923, vol. i, p. 582.
  3. Signed at Shanghai, October 8, 1903, ibid., 1903, p. 91.
  4. See footnote 83, p. 632.