893.5122/40 The Secretary of State to the Minister in China (Johnson) No. 494 WASHINGTON, May 19, 1931. SIR: The Department has received your despatch No. 932 of April 11, 1931, in regard to the collection of a house tax from American citizens at Tsinan. The action taken by the American Consul at Tsinan, as stated in your despatch under acknowledgment, is approved. Very truly yours, For the Secretary of State: W. R. CASTLE, JR. 893.5034 Business Tax/25: Telegram The Minister in China (Johnson) to the Secretary of State PEIPING, June 25, 1931-4 p. m. [Received June 26-10:22 a. m.] 367. Reference Legation's 267, May 13 [11], 5 p. m. and despatches of May 12 and June 1st.36 American Consul General at Nanking on June 11 reported new business tax law passed by Legislative Yuan on June 6th but not promulgated by State Council. Ministry of Foreign Affairs in note dated July [June] 3 states that tax designed to compensate losses resulting from abolition of likin, that it does not contravene principles of taxation and is applied equally and without discrimination to Chinese and foreign merchants. Ministry requests that American merchants be entrusted [instructed] to pay tax as imposed by provinces under the "General Principles" and "Supplementary Rule[s]" previously reported to the Department. Text of business tax law obtained unofficially from Legislative Yuan by Consul General Peck and being forwarded to the Department in pouch leaving tomorrow."T For the Minister: ENTERT 893.512/1147: Telegram The Minister in China (Johnson) to the Acting Secretary of State PEIPING, June 30, 1931-5 p. m. [Received 6:55 p. m.28] 380. [1.] Following from American Consul at Foochow : "Provincial Government contemplating levying a 25 percent surtax on customs duties for provincial needs. In the event such a surtax is put into effect what attitude does the Legation desire me to adopt? The French, Japanese, and British Consuls are sending similar telegrams to their respective Ministers.["] and Legation with Department's approval proposes to send following reply to Foochow : "Legation has been informed that if tax is actually imposed upon foreign firms British and French Legations will instruct their Consuls to lodge protest with Provincial authorities on grounds that it is in violation of principle of uniformity of customs tariff on all land and maritime frontiers as provided in annexes to British confederation [sic] tariff treaties [treaty] of 1928.39 In event such protests are lodged, you may insist that American firms shall be accorded nondiscriminatory treatment as compared with other foreign and Chinese firms.” 2. Following from American Consul at Hankow: "June 27, noon. A bureau has been established at Changteh, Hunan, to collect a 'products tax'. The American firm Werner G. Smith has been assessed 54 Mexican cents per picul on a shipment of 14,000 piculs of wood oil. In view of National Government's recent increase of export duties and lack of any official notice of establishment of bureau I request instructions whether I may lodge protest with Hunan Provincial Government in which event Legation may also wish to consider lodging protest with Nanking authorities." Tax being only upon Chinese export products, Legation perceives no ground for protest unless upon an additional pertinent basis indicated in paragraph 1 above and/or on grounds that lack of notice of tax imposes hardship on American firm concerned. Department's instructions requested. 3. In this general regard, the Department is also referred to Tientsin's despatch of May 13, 1931, to the Legation (copies to the Department in May 29 pouch) 40 regarding unprotested Hopei provincial taxes on imports and exports. JOHNSON 893.512/1147: Telegram The Acting Secretary of State to the Minister in China (Johnson) WASHINGTON, July 3, 1931-4 p. m. 220. Your 380, June 30, 5 p. m. The Department is making a study of the taxation questions raised in your telegram under reference, but, "Treaty relating to the Chinese Customs Tariff, etc., between Great Britain and China, signed at Nanking, December 20, 1928, with annexes and exchanges of notes..., League of Nations Treaty Series, vol. xc, pp. 337, 352. "Not printed. pending the issuance of further instructions, your proposed reply to Foochow quoted in paragraph 1 of your telegram is approved. CASTLE 893.156/41: Telegram The Acting Secretary of State to the Minister in China (Johnson) 230. Your 389, July 4, 11 p. m."1 WASHINGTON, July 15, 1931-3 p. m. 1. The Department concurs in the view of the Legation expressed in the first sentence of paragraph 4 of the telegram under reference and is of the opinion that every effort should be made to oppose any attempt of the Chinese Municipal authorities at Shanghai to enforce these new regulations against American nationals. Furthermore, the Department believes that this question should be discussed by the interested Ministers of the Protocol Powers 42 with a view to an accord being reached among them in regard to similar representations to be made, either formally or informally, to the Chinese authorities either by the Ministers concerned or by their consular representatives in Shanghai. To assist you in discussing this question with your colleagues, the Department makes the following observations. 2. It is the Department's understanding that the right to grant title to foreshore land and to prescribe the conditions governing its use is vested in the National Government of China and not in the Provincial and Municipal Governments and that any law, rule or regulation in regard to rights in foreshore property should be promulgated or approved by the National Government. The rights of the National Government in the Shanghai area are restricted by the Land Regulations of the International Settlement and by various Whangpoo Conservancy Agreements, and these rights, whether exercised by the National Government or by its duly authorized agent, may be exercised only in conformity with the provisions of the agreements herein mentioned. 3. The regulations in question, if permitted to apply to foreshore property of American nationals, would seriously impair if not destroy existing rights in immovable property lawfully acquired by American nationals and evidenced by title deeds duly stamped by the appropriate Chinese authorities or by Shengko receipts issued by the Whangpoo Conservancy Board pursuant to Paragraph 5, Supplementary Article 12 of the Whangpoo Conservancy Agreement of 1912.13 The regula 41 42 See Protocol of September 7, 1901, Foreign Relations, 1901, Appendix (Affairs in China), pp. 312, 318. 43 Treaties, Conventions, etc., Between the United States of America and Other Powers, 1910–1923 (Washington, Government Printing Office, 1923), vol. ш, p. 3043. tions, if enforced against American nationals, would also prevent their acquisition and use of foreshore property in accordance with the conservancy agreement mentioned. While, of course, the conservancy agreement referred to herein remains in force until amended or abrogated by agreement of the Chinese Government and the competent Treaty Powers, it is pertinent to note that its continued effectiveness was expressly recognized by the Chinese Government in Article 129 of the Treaty of Versailles" and Article 114 of the Treaty of SaintGermain-en-Laye."5 4. As you and the British Minister are mutually conversant with the provisions of the British and American drafts of the proposed new extraterritoriality treaties with China 6 in regard to those articles dealing with taxation and with rights in immovable property, you may discuss confidentially with the British Minister the relation of the provisions in these drafts to the new Municipal regulations under discussion. The Department would view with misgiving approval of any Municipal regulations which go further in matters of taxation than we have gone in the drafts referred to. 5. With regard to the instructions which you understand have been given to the British Consul General, referred to in paragraph 5 of your telegram, the Department does not understand why there should be any need to reaffirm title to water front property. If title documents have been duly issued in conformity with the provisions of applicable treaties or agreements, such documents would appear to constitute evidence of indefeasible title. 6. In the light of the Department's observations you may in your discretion again communicate your comments to the Department or proceed at once to discuss the question with your colleagues. CASTLE 893.512/1152: Telegram The Minister in China (Johnson) to the Acting Secretary of State PEIPING, July 23, 1931-3 p. m. [Received July 23,-2: 05 p. m.*7] 456. 1. Reference Shanghai's despatch No. 6852 of March 31, 1931, to the Legation and Shanghai Senior Consul's circular No. 215-E-IV "Treaties, Conventions, etc., 1910-1923, vol. I, pp. 3329, 3392. China did not sign the Treaty of Versailles, but for application of certain articles, see Agreements Between Germany and China Regarding the Restoration of the State of Peace, signed at Peking, May 20, 1921, League of Nations Treaty Series, vol. IX, p. 271. Treaties, Conventions, etc., 1910-1923, vol. III, pp. 3149, 3186. 40 pp. 716 fr. 47 For correspondence on the negotiations regarding extraterritoriality, see Telegram in three sections. 48 of June 15, 1931, concerning application of Chinese rolled tobacco consolidated tax regulations to Chinese residents of International Settlement, copies of which were sent direct to the Department. 2. Agreement affects notes exchanged on March 19th and 24th, respectively, between Shanghai Senior Consul and the Director General of the consolidated tax administration of the Ministry of Finance provided in article 1, that the rolled tobacco consolidated tax regulations should be applied in the International Settlement "to the Chinese residents only". 3. Agreement was expedient and necessary as cigarette manufacturers outside Settlement area, mostly foreign, were paying tax while manufacturers in the Settlement area, all of which though were Chinese, were not paying the tax. Tax immunity of Settlement residents thus resulted in discrimination in favor of Chinese residents as against foreign nonresidents. 4. Senior Consul's circular number 215-E-IV of June 15, 1931 gives draft of letter which Senior Consul proposed with assent of his colleagues to send to the Chairman of Municipal Council pointing out that because agreement limited application of tax to Chinese residents only certain nonextraterritorial foreign residents of the Settlement were taking advantage of it to manufacture cigarettes within the Settlement exempt from taxation. Department will note that Senior Consul proposed to notify the Chairman of the Municipal Council that the consular body would interpose no objection to the municipal agent "Applying in his discretion to the local Chinese courts for legal process against nonextraterritorial foreigners residing in the International Settlement" guilty of offenses against the rolled tobacco consolidated tax regulations. 5. In other words, consular body at Shanghai proposed, without reference to either the Chinese or to the diplomatic body, to extend agreement to nonextraterritorial foreigners resident in the Settlement. 6. This proposal received the approval of the entire consular body at Shanghai with the exception of the German Consul General who objects on the ground that: (1) existing agreement is applicable only to Chinese residents; (2) agreement may not be modified by consular body without previous consent of diplomatic body including representatives of nations without extraterritorial privileges who should be given an opportunity to examine agreement to see whether its application to their nationals would not be contrary to their existing treaties or most-favored-nation clauses; (3) it is dangerous to permit the rolled tobacco consolidated tax regulations to be applied to "any foreigners in the Settlement". 48 Neither printed. 587122-46—VOL. III- -70 |