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Inauguration of the prepared opium tax when this collective tax has been put into force; both foreign and native opium will be taxed alike under the original Regulations.
The Viceroy at Canton requests this Board to communicate to your Excellency the particulars of the scheme now being inaugurated, and in so doing we have the honour to make the following observations:
Latterly the value of foreign opium has exceeded by at least 100 per cent. the value of native opium. Formerly the duty and li-kin on native opium only amounted to 60 taels; now they amount to over 80 taels or 90 taels; and, as his Excellency the Viceroy points out in the telegram we have quoted, even Kueichou opium, which pays the smallest amount of all in duty and li-kin, still pays a sum proportionately equivalent to the amount levied on the foreign drug, when the value of the latter is considered. It is clear, therefore, that Szechuan and Yunnan opium pay even more, in proportion, than the foreign drug, and we would refer your Excellency to clause 5 of the Additional Article to the Chefoo Agreement, which exactly applies to this case, viz., the words "in the event of such tax or contribution being calculated ad valorem the same rate, value for value, shall be assessed on foreign and native opium."
With regard to levying a tax on prepared opium, this is to be a tax on all opium, whether native or foreign, after it has been boiled down into "kao," or prepared opium, and its levy is still less an infringement of the Treaty.
In replying to the Viceroy's telegram we have urged his Excellency to carry out the "collective taxation" of the native drug with care and precision, and in now communicating these facts to your Excellency I trust you will telegraph to His Majesty's Government and the Government of India requesting them to give their early consideration to the Canton prepared opium tax Regulations, in order that we may be in a position to notify the Viceroy that he may inaugurate this system without delay.
I avail, &c.
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Cost, some 3,500,000 taels of opium li-kin. If your Highness will invite the Board of Revenue to report what were the receipts from li-kin on foreign opium prior to 1886, I think the figures will show that it is not to the interests of China that the system previously in force should revive.
But if there is to be an endless series of attempts on the part of the provincial authorities to place extra taxation on foreign opium, the resulting state of uncertainty will so nearly resemble that prevailing twenty years ago that the advantages of the Additional Article will be lost, and its abrogation will, in my opinion, become necessary.
I venture to hope that your Highness will call the attention of the provincial authorities to these considerations.
I avail, &c. (Signed)
ERNEST SATOW,
Inclosure 2 in No. 1.
Your Highness,
Sir E. Satow to Prince Ch'ing.
Peking, September 8, 1904,
I HAVE the honour to acknowledge the receipt of your Highness' note of the 27th August on the subject of taxation of prepared opium at Canton. Your Highness quotes the 5th clause of the Additional Article with regard to an ad valorem tax, but omits the final sentence of that clause, which is, that in ascertaining, for the purpose of ad valorem taxation, the value of foreign opium, the amount paid on it for li-kin at the port of entry shall be deducted from its market value. I find no reference in the Viceroy's communication to the Board to this point, and I can only suppose that his Excellency has overlooked it, but it is, of course, of material importance.
It appears to me that the whole difficulty of this question of the taxation of foreign opium is due to the fact that the provincial authorities have forgotten the history of the negotiations that led to the signing of the Additional Article in 1885. If your Highness will refer to the reports of those negotiations, which lasted several years, you will find that the argument used by the Chinese negotiators was that it was better for the foreign importer to pay even a great deal more than he had previously done, provided he thereby gained certainty as to the amount to be levied, and was no longer exposed to charges governed by the financial needs of the provincial authorities. The foreign merchants interested declared that they could not trust the Chinese Government, but the Chinese Minister represented that the new arrangement was one devised by China herself, and that she would certainly keep faith. The British Government accepted these assurances, and the Additional Article was signed. For many years it worked smoothly, and the provincial authorities made no attempt to levy any tax beyond the 110 taels paid at the port of entry. It cannot be supposed that they would not have done so if they had the power; their reason for abstaining was that they knew they had no right to levy it under the new Article. But as time has gone on, they have apparently begun to forget the state of things that existed before 1886; they see that the Additional Article places restraints on their power of taxation of foreign opium, and they forget that it gives the Chinese Government such a revenue from foreign opium as it never obtained before. Every year the Central Government receives in import duty on the drug some 1,300,000 taels. This they would continue to receive even if the Additional Article were abrogated. But they also receive, collected by the Imperial Maritime Customs, without any extra trouble or ...