893.5323/65: Telegram

The Counselor of Embassy in China (Lockhart) to the Secretary of State

841. Peiping Union Medical College has been served written notice by the “Peiping National Tax Administration” that it must henceforth collect income tax from its officers and employees and pay such collections into the Hopei Provincial Bank. Accumulated income taxes, of which there are approximately $3,000 now required at the college, must be paid into the Hopei Provincial Bank. The amounts of the above collections must be reported to the Peiping National Tax Administration. Apparently the tax rate and the rules and regulations enforced by the Nanking Government are to carry into effect under the new administration.

The China Medical Board, Incorporated, which supplies the financial support to the Peiping Union Medical College, is registered as an American concern with the Consulate General at Tientsin, the registration expiring August 16, 1938. The Peiping Union Medical College previously deducted, for payment to the National Government at Nanking, income tax from the salaries paid to officers and employees. This, however, was discontinued 2 or 3 months ago. It is understood that a notice similar to the above has also been served on Yenching University.

In view of the complications which might ensue, regardless of whether the two institutions above named agree to collect the taxes from their officers and employees, I should greatly appreciate the Department’s instructions on the matter. The Department’s position on the question of the income tax imposed by the Nanking Government is well understood by the Embassy, but the situation which has now arisen here, incident to the establishment of the new régime, presents a problem both complex and important from the point of view of recognizing the authority of the new régime. The matter of expediency or business policy would seem to be an important factor to be considered by the institutions concerned.