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service of the national debt in the manner above provided for, including, after all loan services have been met, the settlement of claims against the Chinese Govern- ment or Chinese Government Departments or Provincial Administrations, the validity of which are admitted by the Chinese Government, but funds for the payment of which are not available from other sources; and they will annually hand over the balance, if any, after due provision has been made for a reserve of dollars to the Ministry of Finance for the use of the Central Government. Any other bank of the same nationality may be substituted for any one of the above custodian banks at the will of the Government of the country concerned.
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(Note. The constitution of any commission for the custody of customs revenues is obviously a very difficult and contentious question. The opening sentence of the above paragraph is designed to justify a demand which may at first sight prove highly objectionable to Chinese amour-propre. Possibly the Chinese and foreign directors of the Bureau of National Loans” and the Chinese and foreign chiefs of the "Accounts and Audit Department,' which were provided for under article 14 of the Reorganisation Agreement of 1913, but which have never really functioned except for the purpose of drawing salaries from salt funds, might be resuscitated in this connection. M. Padoux has formulated proposals (knowledge of which has been obtained from a confidential source) for a commission, composed of high Chinese officials, including foreigners in the service of the Chinese Government and one representative of the foreign and one representative of the Chinese banks, to take charge of all national revenues, with the duty of paying out funds to meet the service of the consolidated debt and for administrative If the purposes, and of generally controlling the national revenues. Chinese themselves, acting on M. Padoux's recommendations, put forward proposals on these lines, they would, of course, have to be considered. But it is doubtful whether such an ambitious plan could be made to work, and in many ways it seems safer and preferable to content oneself with making really satisfactory arrangements, if it is possible to do so, for the custody of the customs revenues alone.)
It is agreed that, in view of the present consolidation arrangements, certain of the loans concluded since the establishment of the republic shall have their interest reduced and their amortisation extended in the manner specified in the attached schedule (see Annex IV).
The Chinese Government undertake that the control and machinery of the Maritime Customs Administration will remain unchanged as long as any foreign obligations are secured on the customs revenues. But the Chinese Government shall be free to redeem any of these obligations before the date of their falling due by arrangement with the representatives of the bondholders concerned.
ARTICLE 4.
The Chinese Government will levy an excise on all goods manufactured in China on a scale not greater than the total, and not less than two-thirds of the total, of the import duty (including surtax) levied on corresponding articles imported from abroad. The native manufactures on which this excise will be charged include all machine-made yarn and cloth and all other products of foreign type turned out by machinery, whether by Chinese or foreigners, in the interior and at the open ports, and also all wines, beer, porter, spirits, tobacco products and narcotics. Native manufactures made entirely, or partly, of imported raw materials which have paid import duty shall be free of excise, or entitled to a pro ratâ reduction of excise, in accordance with the amount of imported as opposed to native raw material used in their manufacture. Manufactured goods which have paid excise shall on exportation be free of export duties.
(Vote. The possibility of the tax-free privileges of so-called Government
factories being abused should perhaps be guarded against.)
ARTICLE 5.
The Chinese Government undertake that there will be no discrimination against imported goods, or against articles manufactured by foreigners in China, or against goods purchased by foreigners in China, whether in regard to taxation, or in connec tion with transportation rates, or in any other respect whatsoever, except in so far as is provided in the present treaty.
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ARTICLE 6.
The Chinese Government undertake to create an Excise Administration with foreign assistance under the control of a Chinese director and foreign associate director, on the lines of the Salt Administration, for the purpose of collecting the excise duties on manufactured articles other than wines, beer, porter, spirits, tobacco products and narcotics.
The Chinese Government undertake to reorganise the Wine and Tobacco Administrations with foreign assistance under the control of a Chinese director and foreign associate director, on the lines of the Salt Administration, for the purpose of collecting the excise duties and inland tax on manufactured and imported wines, beer, porter, spirits, tobacco products and narcotics.
The Chinese Government undertake to reorganise the Stamp Tax Administra- tion with foreign assistance under the control of a Chinese director and associate foreign director, on the lines of the Salt Administration, for the purpose of collecting the stamp duties; and the Governments of the other contracting Powers will there- upon agree to the payment of these stamp duties by their nationals in China in accordance with the Chinese Stamp Tax Law.
The Chinese Government undertake to introduce certain reforms into the Salt Administration, with the object of securing the more efficient collection of the revenues, on the lines indicated in the attached memorandum (see Annex V); and they further undertake that the functions and powers of the foreign associate directors and foreign staff of the Excise, Wine and Tobacco and Stamp Tax Administrations will be based on similar principles.
The Chinese Government undertake that the establishment and reorganisation of the Excise, Wine and Tobacco, Stamp Tax and Salt Administrations provided for in this article will be carried completely into effect within one year from the date of the signature of the present treaty.
(Note. An alternative proposal is that the excise duties should be collected and disposed of by an excise branch of the Customs Administration, as contemplated in the Mackay Treaty. There are various advantages in such a proposal, and only one serious disadvantage, that of unduly increasing the difficulties and responsibilities of the Maritime Customs Administration. If it is desired to adopt this suggestion in the present scheme, all that is necessary is to stipulate that the new Excise Administration shall be a branch of the Customs Administration and under the control of the Inspector-General of Customs, as contemplated in the Mackay Treaty.)
The revenues from the inland tax levied on imported and locally manufactured wines and tobacco products, &c., by the Wine and Tobacco Administration will be dealt with in the same way mutatis mutandis as the revenues from transit pass dues (as provided for in article 1), and will be similarly distributed by the Chinese and foreign chiefs of the Wine and Tobacco Administration pro rate amongst the provinces for local expenditure of a productive nature in compensation for any loss of internal revenue to the provinces entailed by the new procedure.
The revenues from the factory excise and from the excise on wine and tobacco products will accrue in their entirety to the Central Government.
(Note
The factory excise duties on native goods correspond to the import duties on imported goods, and they thus accrue to the Central Government. the provinces being placated by the transit pass dues on native and imported goods. The inland taxes on wine and tobacco products correspond to the transit pass dues on other goods, and therefore go to the provinces.) The revenues from the salt duties shall be divided into three parts, two-thirds being placed at the disposal of the Central Government for the payment of any obligations secured on these revenues and thereafter for the general purposes of the Government, and the remaining third being distributed by the Chinese and foreign chief inspectors pro ratá amongst the provinces. Subject to the above arrangements for the distribution of a third of the salt revenues amongst the provinces, existing agreements between the Chinese Government and foreign interests in regard to the collection and disposal of the said revenues shall continue in force.
(Note. The provisions of the above paragraph would require the assent of the
banks parties to the Reorganisation Loan Agreement of 1913.) [13577]
H