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entitled to the protection of the United States by virtue of the provisions of section 4 of the act of Congress of July 1, 1902, which provides :

That all inhabitants of the Philippine Islands continuing to reside therein who were Spanish subjects on the eleventh day of April, eighteen hundred and ninety-nine, and then resided in said islands, and their children born subsequent thereto, shall be deemed and held to be citizens of the Philippine Islands and as such entitled to the protection of the United States, except such as shall have elected to preserve their allegiance to the Crown of Spain in accordance with the provisions of the treaty of peace between the United States and Spain signed at Paris December tenth, eighteen hundred and ninetyeight. I have, etc.,

HUNTINGTON WILSON.

ILLEGAL TAXATION OF FOREIGN PRODUCTS IN MANCHURIAN

PROVINCES.

File No. 693.116/46.

The American Minister to the Secretary of State. No. 124.]

AMERICAN LEGATION,

Peking, November 22, 1910. Sir: I have the honor to bring to the notice of the Department the numerous complaints which are being made, particularly in the Manchurian Provinces, regarding the imposition of illegal taxes on foreign products after passing into Chinese hands. The charge has been made, notably by the Standard Oil Co., of the frequent petty taxes to which their products have been subjected, in spite of the payment of the customary surtax. While the legation has endeavored to settle such abuses where possible by local means, and has instructed its consular representatives to seek cooperation with their colleagues whose nationals suffer similarly, it would withal be too optimistic to hope that such remonstrances alone will suffice to correct this evil which is now engaging the attention of the diplomatic body. At the present the latter is endeavoring to ascertain the precise nature of these taxes, since it is quite possible that a close understanding of the same will facilitate the settlement of a somewhat complicated question.

While these taxes vary considerably at different localities, the following are among those described by the Newchwang agency of the Standard Oil as exacted at Kirin, where the abuse appears to be the greatest:

The hill and sea tax, 15 candareens per case; seven and four li tax, equals 0.011 per cent on value; business on sales 1 per cent; then there is a small tas for writing out a receipt for the payment of the hill and sea tax.

The Chinese argument to justify such taxation is, that while the payment of the customs surtax protects the goods during their period of transit until their place of destination, after the latter are sold to Chinese subjects, and when the latter sell to each other, they must pay the inland taxes according to regulations. Needless to say this view has so far been strenuously resisted by all foreign interests concerned.

It is obvious that though additional direct taxation on foreign goods may perhaps be prevented by strenuous diplomatic action, other means could be found to accomplish the same result. Were an income tax, for instance, feasible in China, the revenue derived from

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Nothing in this etisie is intended to interfere with the indenuit right of China to iery sobotbes taxes as are not in outlict with its provisionstogether with the interpretation given to this by the Chinese treaty commissioners (See Treaties beitreen China and Foreign States 1, 553.) The argument in faror of further taxation is, therefore, not without some ground and it would seem both impolitic and inequitable to resist it altogether. Should you approve, the legation will nse its best efforts to seek a solution, subject, of course, to your final approral, on a basis more friendly to Chinese fiscal interes than is comported by the present attitude of hostility to any and every form of local tasation. In this, as in other instances, I feel satisfied that we can safely leare the onus of combating any at. tempts at exacting exaggerated taxation to the powers more keenly interested than ourselves and confine our own efforts to the part of a mediator between the Chinese and such nations. In the meantime this will not prevent the legation taking all proper measures to seek to remedy such abuses as occur. (See Inclosure.)

It should also be noted that one element of discrimination in the situation exists. And that is, where Japanese merchants retail the merchandise, they refuse to pay this local tax, and the Chinese authorities let them alone. The same may be said of the Standard Oil Co. when it sells its own oil, it refuses to pay the tax, and no further effort is made to collect the same. But when the merchandise is in the possession of the Chinese merchant he is compelled to pay, I have, etc.,

W. J. CALioun.

[Inclosure.]

The American Minister to the American Consul at Nevochucang.

No. 239 (Cons.).]

AMERICAN LEGATION,

Peking, November h. 1910. Sib: I have to acknowledge the receipt of your dispatch No. 8 of the 14t instant containing supplementary information regarding the Illegal impo. sition of certain taxes by the local authorities in Manchuria. The matter in one which is now occupying the attention of the diplomatic body and it is likely that a concerter effort will before long be made to remove the abuses which do pot appear to be confined to any one locality. In the meantime the legation in

gratified to learn of your British colleague's willingness to cooperate with you in attempting to effect a local settlement. Should your joint efforts in this direction still prove unavailing you are requested to place before me as many recent concrete instances of such unjust taxation of American products as you are able to gather and I will be glad to take the matter up with the Wai Wu Pu without waiting for the collective action of the diplomatic body. I am, etc.

W. J. Calhoun.

The Acting Secretary of State to the American Minister.

No. 104.]

DEPARTMENT OF STATE,

Washington, January 30, 1911. SIR: The Department is in receipt of your No. 124, of November 22 last, relating to the numerous complaints that are being made, particularly in the Manchurian Provinces, regarding the imposition of illegal taxes on foreign products.

A despatch has been received from the Antung consulate; also its No. 43 S, with copies of the legation's Nos. 162, of September 6, 1910, and 208, of October 19, 1910, to Antung; and Antung's No. 30 L, of October 12, 1910, to the legation, relating to the discrimination · against American goods shown in the collection at that port of the consumption tax.

The American Government sympathizes with China in its desire to obtain an increase of revenue which is undoubtedly needed to meet the increased expenditures made necessary by the program of reform which has been undertaken, and desires to assist that program in every legitimate way; but the consistent attitude of this Government toward the questions involved can not be lightly abandoned.

For more than half a century the United States has steadily opposed the levy and collection of taxes in contravention of the treaties. The clearest statement of the legitimate procedure in regard to the internal taxation of foreign imports, and of exports to foreign countries is that stipulated in Articles XI and XII of the Japanese treaty of commerce and navigation of 1896. Under the provisions of these articles the payment of the transit tax exempts the goods from all further inland charges whatsoever.

These privileges appear to have been granted by China to Japan freely, without any consideration, and in that case may undoubtedly be claimed by Americans under the favored-nation clauses of our own treaties; otherwise American trade is made to suffer serious discrimination. The Department and the legation, therefore, have heretofore uniformly insisted upon the refunding of all taxes and dues collected in excess of those provided by the treaties.

You are of course aware that neither section 8 of the British commercial treaty of 1902 nor Article IV of our own treaty of 1903 are in force. Until likin is abolished these provisions of the treaties are inoperative.

The situation in Manchuria is made more serious according to the dispatches of Consul Baker by the discrimination shown in the collection of a consumption tax upon sales of foreign goods. Some foreign firms resist payment and are exempt. The Japanese goods are apparently exempt entirely from the tax, probably because sales are made through Japanese agents only who refuse to pay the tax. This works great injustice to certain American goods which are thus greatly handicapped in their competition with Japanese products of The same class.

The Department has received a number of letters from the Cotton Goods Export Association of New York complaining of the injustice with which they are treated in Manchuria.

The Department can not but regard as a matter of serious importance the disposition of the Chinese local authorities to disregard the plain provisions of the treaties.

You are instructed, therefore, to continue to protest against any taxation of American goods in excess of that allowed by the treaties and to urge upon the Chinese Government the duty of securing equality of commercial opportunity in Manchuria no less than in other Provinces of the empire by avoiding all discrimination in the levy and collection of such duties and taxes as are legal. You will point out to the Chinese Gorernment the serious effect upon American trade of any such discrimination as is mentioned in the dispatches from Antung.

In this connection, your attention is called again to the telegraphic instruction of November 25 asking for full report by mail of present conditions at Dalny and along the South Manchurian Railway respecting the import of foreign goods.

The Department is anxiously awaiting this report and trusts its receipt may not be unduly delayed. I am, etc.,

HUNTINGTON Wilson. File No. 693.116/49.

The American Minister to the Secretary of State.

No. 200.]

AMERICAN LEGATION,

Peking, March 9, 1911. SIR: I have the honor to acknowledge the receipt of the Department's instruction No. 104 of January 30, 1911, relating to the numerous complaints that are being made, particularly in the Manchurian Provinces regarding the impositions of illegal taxes on foreign products fter passing into Chinese hands. I note the Department's statement therein to the effect that the Government of the United States can not but regard as a matter of serious importance the disposition of the Chinese local authorities to disregard the plain provisions of the treaties. I am, moreover, instructed to continue to protest against any taxation of American goods in excess of that allowed by the treaties, and to urge upon the Chinese Government the duty of securing equality of commercial opportunity in Manchuria by avoiding all discrimination in the levy and collection of such duties and taxes as are legal.

The question is one now occupying the attention of the diplomatic body and it is likely that a concerted effort will before long be made to remove the abuses which do not appear to be confined to any one locality. On November 18, 1910, the dean addressed a letter to the senior consul at Mukden, the Japanese consul general, asking for further information regarding the method of taxation and specific instances of these illegal impositions. When the draft of the pro

posed letter was circulated among the members of the diplomatic body, I suggested, in view of the fact that all of our consuls in Manchuria had reported the prevalence of this form of illegal taxation in their respective districts, that the inquiry be extended to the whole of Manchuria, and not to Mukden and vicinity alone. This suggestion was approved by my colleagues. The Japanese consul general, in a letter of January 10, 1911, submitted a memorandum on the subject to the dean of the diplomatic body, a copy of which is inclosed for the Department's information. I desire to call attention to the statement in the letter that while the state of affairs now prevailing in Fengtien Province may be considered fairly satisfactory, it seems clear that the Kirin provincial authorities openly maintain a right to tax certificated goods once such goods are in Chinese hands.

Since the receipt of the letter from the senior consul at Mukden I have heard nothing further of this matter from my colleagues here, nor have any of our consuls in Manchuria addressed me recently on the subject. It is believed that with the prevalence of plague in Manchuria and the attending disorganization of trade there may be a momentary cessation in these abuses. But the restoration of normal conditions throughout Manchuria will doubtless see the recurrence of these illegal practices.

I have to-day written the American consular officers at Mukden, Harbin, and Antung, acquainting them with the Department's views as contained in the instruction under acknowledgment, and at the same time expressing the hope that they may succeed in inducing their colleagues to cooperate in attempting to effect a local settlement, Should their joint efforts in this direction still prove unavailing they are requested to inform me further regarding the method of taxation and to place before me as many recent concrete instances of such illegal imposition on American products as they are able to gather. Upon receipt of this additional information I will be glad to take the matter up with the Wai Wu Pu in case it is impossible to secure the collective action of the diplomatic body. As this is such a difficult and complicated question and as the nationals of all the leading representatives here are suffering similarly, though perhaps to varying degrees, I hope to succeed in inducing the diplomatic body to take prompt and energetic steps to remedy the abuses complained of. Collective action in a matter of this nature is, I find, almost without exception more satisfactory than individual action.

Any other developments in this question will be immediately reported to the Department. I have, etc.,

W. J. CALHOUN.

[Inclosure.) The Japanese Consul General at Mukden to the Dean of the Diplomatic Corps

at Peking.

CONSULATE GENERAL OF JAPAN,

Mukden, January 10, 1911. YOUR EXCELLENCY: In reply to your letter of the 18th of November last I have the honor to submit in the form of a memorandum a report on the present system of taxation obtaining in the three eastern Provinces with special reference to the taxation of foreign goods and native goods under exemption certificates.

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