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Excise and inland tax are to be levied on articles manufactured in China. including wine and tobacco products, on a corresponding scale.
Provision is made for the eventual grant of full tariff autonomy.
As regards the distribution of revenues between the Central Government and the provinces:-
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The Central Government will receive the customs revenues (for consolidating the deht) and the factory and wine and tobacco excise duties and two-thirds of the stamp tax and salt duties; and,
The Provinces will receive the general transit pass dues (later inland tax) and wine and tobacco inland tax and one-third of the stamp tax and salt duties.
Approximate estimates of the above revenues under these proposals will be found in Annex VI.
There are, of course, many objections which may be raised against, and alter- natives which may be put forward for, the above proposals, which may, however, serve In any case the Chinese as a basis for a consideration of the general problem. Government will doubtless submit proposals of their own.
January 20, 1925.
E. TEICHMAN.
Scheme for the Abolition of Internal Taxation and Fiscal and Financial Reconstruction in China.
PART I.
ARTICLE 1.
It is agreed that the following methods of procedure shall be immediately applied in preparation of the way for the abolition of li-kin in accordance with the provisions of articles 2 and 3 of the Chinese Customs Tarifi Treaty, signed at Washington on the 6th February, 1922.
The use and protection of transit passes shall be extended to all produce and goods of native or foreign origin, whether in Chinese or foreign hands, without restrictions of any kind, and irrespective of their provenance and ultimate disposal, whether in China or by export abroad (excepting only wines, beer, porter, spirits and tobacco products and narcotics, which shall be dealt with as hereinafter provided, and articles trade in which is prohibited or subjected to special restrictions with the consent of the Treaty Powers as specified below). Under these new arrangements, therefore, all produce and goods of native or foreign origin, whether in Chinese or foreign hands, being conveyed either from the interior to the open port at which the transit pass is issued, or from such open port to any internal market, without limitation as to method of transport, shall be entitled on payment of the treaty transit dues of 24 per cent. ad valorem to be covered by transit passes which shall afford full protection against any further taxation en route, including maritime customs duties when traversing a treaty port, in the case of outward transit pass produce or goods, from the time they are purchased and despatched from the internal district named in the transit pass as their place of origin until they reach the hands of the consignees at the place of their destination, and in the case of inward transit pass produce or goods from the time they are imported or purchased and despatched from the place at which the transit pass is issued, until they reach the hands of the consignees at the internal market of their destination or wherever they may be disposed of en route. But in the case of outward transit pass goods the place of destination, and in the case of inward transit pass goods the place of despatch, must be a place at which a Maritime Customs Station is established.
Transit passes will continue to be issued by the Maritime Customs Administra- tion, who will, in consultation with the Legations principally interested, draw up a detailed procedure regarding their issue and use and the payment of transit pass dues, including satisfactory arrangements in regard to repacking and processing privileges, based on the provisions of existing treaties as modified by those of the present treaty.
The revenues from transit pass dues will continue to be collected by the Maritime Customs Administration and will be lodged, less expenses of collection, in the Shanghai office of the Bank of China, where they shall lie in a special account at the disposal of the head of the Revenue Council and the Inspector-General of Customs, who, acting on behalf of the Central Government, will distribute the proceeds pro ratá
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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. In the event of any taxation being levied, directly or indirectly, on such transit pass produce or goods, or on their conveyance, while en route to the consignees at place of destination, the amount of such taxation will be refunded, on presentation of taxation receipts or other satisfactory proof of payment, by the Customs Administration, out of and up to the amount held by the said Administration on account of transit pass dues for the province in which such taxation is levied, and the total amount of such irregular taxation shall be deducted from the amount due on account of transit pass dues to the province in question. In the event of the amount of such taxation exceeding the amount due to the province concerned, reimbursement will be made by the provincial authorities, or, if the said authorities fail to do so, by the Central Government, out of other funds.
No taxation of any kind will be levied on outward transit pass goods at the place of production or origin at the time of or after their purchase, whether by way of monopoly fees, production taxes, weighing taxes, inspection fees, or other means: and any such taxes levied at the place of production or origin before the produce or goods are purchased and come under the protection of the transit pass shall not exceed a total of 2 per cent. ad valorem in one locality. Any destination, consumption, or other taxes levied on inward transit pass goods after they have reached the hands of the consignees at the place of destination shall similarly not exceed a total of 24 per cent. ad valorem in one locality, and such destination or consumption taxes shall not be levied on transit pass produce or goods at the last barrier or rity gates of the place of destination, but, if at all, only after the produce or goods have been removed from their original packages by the consignees for sale or have been sent on to a further destination other than that named in the transit pass. The Peking octroi, being a barrier tax, will therefore not be levied on transit pass. produce or goods sent to Peking, but it is understood that transit pass dues paid to the Maritime Customs Administration on produce or goods sent to Peking will be handed over to the Peking Octroi Collectorate; produce or goods sent to Peking unprotected by transit passes shall be liable to octroi at a rate not exceeding 2 per cent. ad valorem.
No taxation of any kind beyond the import and export duties and any local charges which may have been agreed to by the treaty Powers will be levied on produce or goods. whether in Chinese or foreign hands, or in their original packages or otherwise, at the open ports, or in the harbours, cities, suburbs. or approaches thereof, excepting either transit pass dues or existing native customs duties on produce or goods brought from or despatched into the interior.
Transit passes will be issued on application for every kind of produce or goods, excepting only those in which trade is prohibited, or on the movement of which an embargo may be placed, temporarily or otherwise, by the Chinese authorities with the approval of the Central Government and with the consent of the treaty Powers, and wines, beer, porter, spirits, tobacco products and narcotics, which shall be dealt with as hereinafter provided.
(Note. The question of prohibited imports and exports should if possible be dealt with by the conference. The issues concern the articles which may properly be placed on the list of prohibited imports as munitions of war under Rule III of the 1902 Rules of Trade, the movement of silver dollars under Rules II and V of the 1858 Rules of Trade, the trade in grain (rice, beans, &c.), and the export of live-stock.)
The Chinese Government undertake to abolish the existing coast trade duties, that is to say the export duty and half import duty on native produce carried coast- wise. Instead of the coast trade duties, the new transit pass procedure will be applied to such sea- or river-borne produce or goods (under arrangements to be formulated by the Maritime Customs Administration, which will protect the export duty revenues against abuse), and such produce and goods carried coastwise will thus be placed on the same footing in regard to transit dues privileges as land-borne produce and goods. Foreign imports having paid import duty shall continue to be entitled to he transported from one open port to another open port without further taxation of any kind.
(Note. It will be a matter for consideration whether the Customs Revenues can afford to be depleted by the abolition of the export duty on native produce carried coastwise as well as of the half import duty.)
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