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Enclosure 2 in No. 1.
Memorandum on Taxation on Foreign Goods and Native Goods under Exemption Certificate in the Three Eastern Provinces, such Goods having passed in the hands of Chinese Dealers.
In a question of this nature it is naturally very difficult to procure specific instances of illegal taxation or, indeed, to obtain information. Chinese subjects, for obvious reasons, are reluctant to supply material to a foreign consul which they know will be used against their own authorities.
There are also but few Chinese merchants who confine their business to dealing in foreign goods, and in many cases it is impossible not to suspect that merchants of good standing have private arrangements with the tax collectors the nature of which it is against their interest to disclose,
Considerations such as these show that it is a matter of extreme difficulty to obtain clear proof that illegal taxation is being levied.
As far as Fengtien province is concerned, recent investigations seem to show that the present condition of affairs is fairly satisfactory. Neither the consulates at Mukden, nor those established at other open marts in the province have any outstanding cases, although the Japanese consul at Liaoyang and the American consul at Antung report that consumption taxes are being openly levied within the areas of those marts from Chinese dealers.
On the other hand, at Mukden, a Chinese storekeeper handling only foreign articles, states that no attempt is made to collect local taxes from him, and there also seems to be a system in force that foreign goods bought directly from a foreigner are exempted on production of a bill of sale.
As far as can be ascertained there is a general levy throughout the province of a consumption tax averaging about 2 per cent. ad valorem. This is collected sometimes on arrival of the goods at destination, sometimes at the end of each month on an assessment of the gross value of trade done by the particular merchants.
In the former case goods under exemption certificate would escape; in the latter, more especially as the majority of Chinese importers do not use exemption certificates, it would seem that foreign goods would pay their quota.
Further, after import, when exemption cargo is broken up into small parcels, it would be extremely difficult to protect it against a levy of this nature.
Speaking generally, from the absence of complaints, it seems a not unwarrantable conclusion that the consumption tax is not heavy, on the whole collected reasonably, and that there is a desire on the part of the tax officials to avoid direct levies on exemption cargo.
In Kirin province not only is the scale of taxation heavier but there has been a constant effort on the part of the authorities to levy taxes on certificated goods.
At Ch'angeh'un, and apparently all over the Kirin province, the following taxes are in force :--
Ex
(a.) Kuan chuan," of '07 per cent.
(b.)
"Chu chuan," of '04 per cent.
These are known as the 7 and 4 li tax, and are generally levied from the importer.
(c.) * Mai chien chuan," 09 per cent, levied from the seller.
(d.) The Ying yeh shui," 1 per cent, levied from the importer.
(e.) Hill and sea tax. This is a species of octroi levied mainly on native goods.
But marine products, kerosene, foreign vermicelli, and other articles are included in the tariff, which averages about 3 per cent, ad valorem.
(f.) Special excise taxes are levied on tobacco, wines, and spirits. In the case of tobacco the tax is 10 per cent, ad valorem.
That these taxes have been, and are still being, levied on goods brought in under exemption certificate seems to need no specific proof. The Kirin authorities openly assume the attitude that they may tax such goods as of right once the goods are in the hands of Chinese merchants.
In a report from the Kirin custom-house sent to the American consul on the 28th March, 1908, are the following statements :~~
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"In goods turned over to native merchants exemption certificates are of no avail, and foreign merchants cannot request the non-payment on behalf of merchants who are acting as their agents.
"The collectorate at Changch'un levies duty on kerosene in addition to the 7-4-9 li business tax, but in every case from Chinese merchants, and in no case from foreign merchants."
Mr. F. D. Cloud, then in charge of the American consulate-general, submitted this document for the consideration of his colleagues, and it formed the basis of the identical note which the Mukden consular body sent in to the Viceroy in June 1909, and which was later transmitted to the various legations.
It would appear from the reply of the Wai-wu Pu to the dean of the diplomatic body, dated the 22nd February, 1910, that the Governor of Kirin maintains the same attitude as his customs board. It is stated therein, with reference to the 7-4-9 li tax, "the above-mentioned taxes are all levied on the capital of Chinese merchants." "With reference to the collection of 1 m. 5 c. per case on kerosene oil, this is levied on the business capital of Chinese merchants."
More recently, in reply to a protest against the levy of the kerosene tax brought forward by the American consul at Harbin, the commissioner of the foreign bureau at Kirin, in a letter dated the 28th August, 1910, states, "as to the tax of 7-4- 9 li, it is collected on the capital invested and the proceeds of goods sold, and not on the goods."
Again, on the 22nd October, in a further despatch to Mr. Green on the same subject, the commissioner takes the stand "after foreign goods are sold to Chinese subjects, and when the latter sell to each other they must of course pay the inland taxes according to the regulations."
On the 1st December the Changch'un taotai wrote to His Britannic Majesty's consul-general with reference to a claim to tax sugar imported by a British firm,
"the regulations laid down by the tax office are to the effect that all goods, no matter what the nationality of the importer, must pay the 7-4 li tax on sale to Chinese merchants.
"The exemption certificate only frees foreign merchants from payment of import duty, and cannot free native merchants from payment of tax on goods purchased. As Chien the deputy points out, these taxes are levied from Chinese merchants, and are no concern of foreigners."
In this case the British firm in question complains that their goods, which are all imported under exemption certificate are, on leaving their godowns followed by the police and tax officials to the buyers' shops, and the police prevent cargo leaving the city until the buyers produce a certificate showing that the tax has been paid.
In a proclamation issued by the Changchun tax office in the 9th moon of the present year, clause 9 lays down specifically that purchasers of goods from foreign merchants must pay a buying tax of 1 per cent. Presumably this is the "Ying ych tax."
The Japanese consul at Changchun has, however, recently obtained a verbal promise from the taotai that this claim will be withdrawn.
As regards tobacco an attempt was recently made to levy a tax of 10 per cent. on goods imported by British firms under certificate, within the limits of the open mart of Ninguta. This question is still in the hands of the British consul at Harbin.
At present the consular body at Mukden have little or no information as to the treatment of goods in Hei Lung Chiang province.
(Translation.)
Sir,
Enclosure 3 in No. 1.
Changchun Tastai to Acting Consul-General Willis.
December 1, 1910. WITH reference to your letter protesting against the exaction of local taxation or li-kin on the sugar imported by Messrs. Butterfield and Swire, the former taotai, Mr. Yen, instructed the tax office to examine and report, and duly replied to your letter.
I have now received a report from the General Tax Bureau to the effect that, after the former local tax office had been incorporated with their department, a deputy
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