893.512/1585
The Ambassador in China (Gauss) to the Secretary of State
[Received October 13.]
Sir: I have the honor to report that the Ministry of Finance has approved a modification in the assessment and collection of salt taxes for the purpose of effecting an appreciable increase in revenue. The [Page 728] new duties and collection procedure became effective on September 1, 1941. As of possible interest to the Department a translation of a confidential circular issued by the Directorate-General of Salt Administration on August 28, 1941, is enclosed.98
The salt tax is one of the few remaining sources of revenue from which the Central Government derives its income. The amount collected in salt taxes since the outbreak of hostilities with Japan has been reduced considerably due to Japanese occupation of various parts of China. The revised taxes and collection methods are expected to increase the salt revenue from $100,000,000 (Chinese national currency) to $930,000,000 (Chinese national currency) annually. Other proposals were considered for increasing the revenue beyond $930,000,000 but it was feared that higher salt taxes would result in riots. The new taxes on salt now being collected are believed to [be] the maximum that the people will bear without opposition.
The question of creating a government monopoly to control the production, distribution and sale of salt has been under consideration for several months. The officials of the Salt Administration as well as one of the foreign financial advisors to the Chinese Government have objected to the proposal strongly. They pointed out to the Minister of Finance, who is a leading advocate for establishing government monopolies, that such action would wreck the entire Salt Administration which has required years to build up its present organization. The financial burden which it would place on the government was also stressed. The Minister of Finance was convinced by the arguments set forth and agreed not to establish a state monopoly on salt at the present time.
In some respects it may be said that the government has a semi monopoly on salt in as much as it cannot be moved from the place of production or sold until the tax is collected and a permit granted. In some areas the government owns and operates the means of transportation to distributing points. The control exercised over salt through the present tax system and other regulations enforced by the government may be looked upon as a semi government monopoly already in effect.
Respectfully yours,
- Not printed.↩