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

No. 1192

Sir: I have the honor to refer to the Embassy’s despatch No. 1177 of April 13, 1937,24 and previous correspondence in regard to the Chinese income tax law, and to enclose for the Department’s information copies of Shanghai’s despatch No. 746 of April 10, 1937, to the Embassy24 on the subject.

Mr. Gauss encloses with his despatch a copy of a letter dated April 6 from the Texas Company (China) Limited,24 concerning the deduction of income tax by the Chinese authorities on certain loan debentures of the Municipality of Greater Shanghai held by that company. In his reply to the company of April 10, Mr. Gauss stated that, while the Department has taken the position that the provisions of the Chinese Income Tax Regulations are not applicable to American firms and individuals, it would appear that the National Government has taken an opposing view. He stated further that it was not believed to be practicable to attempt to recover the income tax [Page 681] deductions in question unless it was definitely and precisely provided in the debentures that the payments to be made thereunder should be free from taxes or deductions. The Embassy has informed Mr. Gauss that it approves his reply to the company.

Respectfully yours,

For the Ambassador:
Frank P. Lockhart

Counselor of Embassy
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