cial authorities would, because the United States had an income tax law, consider that that American should pay the Chinese income tax. Dr. Kung added that the British took the position that their nationals should pay the income tax. Mr. Hornbeck remarked, smiling, that, in the light of those statements, Dr. Kung might care to make a test case by beginning with an action in a British court against a British subject for non-payment of the Chinese income tax. Mr. Hamilton said that he did not find himself going along with Dr. Kung's line of reasoning, but that, if we were to admit for the sake of argument that the American judicial authorities in China would adopt the viewpoint advanced by Dr. Kung, would not the American judicial authorities turn to the provisions of the American income tax law, one of which, for instance, exempted a married man and his wife, without dependents, from payment of an income tax if their income were no greater than $2,500 per year. Mr. Hamilton said that this brought up one phase of the Chinese income tax law which made us very reluctant to advise American nationals to pay. Mr. Hamilton continued that foreigners in China were in a vulnerable and conspicuous position; that most of them lived in the treaty ports and at points where they could easily be located; that it would be very difficult for them to avoid payment of the tax; that their scale of living was, as Dr. Kung had mentioned in an earlier part of the conversation, quite different from the Chinese scale; and that the income tax rates prescribed by the Chinese law would so reach and affect the average foreigner in China as to make it very difficult for him to continue to live in China were he required to pay at the rates specified in the Chinese law. Mr. Hamilton wondered whether the Chinese authorities could not give consideration to working out some system whereunder foreigners in China would be subject to rates similar to those which they would have to pay in their own countries. Mr. Hamilton said that he realized that the Chinese Government naturally enacted its law primarily with China and the Chinese people in mind, but that some of our difficulties might be overcome were the Chinese to arrange for readjustment of the heavy incidence of the rates with due consideration of the peculiar position of foreigners in China. Dr. Kung said that he had given some thought to the question of exempting from income tax payment persons engaged in missionary and philanthropic enterprise. Mr. Hornbeck said that he did not think that the Chinese need worry greatly in regard to the American attitude in regard to the Chinese income tax law and that he thought that the whole matter would probably be satisfactorily taken care of within a few years. S[TANLEY] K. H[ORNBECK] 893.5123/65: Telegram The Counselor of Embassy in China (Lockhart) to the Secretary of State PEIPING, December 22, 1937-6 p. m. [Received December 22-3: 50 p. m.] 841. Peiping Union Medical College has been served written notice by the "Peiping National Tax Administration" that it must henceforth collect income tax from its officers and employees and pay such collections into the Hopei Provincial Bank. Accumulated income taxes, of which there are approximately $3,000 now required at the college, must be paid into the Hopei Provincial Bank. The amounts of the above collections must be reported to the Peiping National Tax Administration. Apparently the tax rate and the rules and regulations enforced by the Nanking Government are to carry into effect under the new administration. The China Medical Board, Incorporated, which supplies the financial support to the Peiping Union Medical College, is registered as an American concern with the Consulate General at Tientsin, the registration expiring August 16, 1938. The Peiping Union Medical College previously deducted, for payment to the National Government at Nanking, income tax from the salaries paid to officers and employees. This, however, was discontinued 2 or 3 months ago. It is understood that a notice similar to the above has also been served on Yenching University. In view of the complications which might ensue, regardless of whether the two institutions above named agree to collect the taxes from their officers and employees, I should greatly appreciate the Department's instructions on the matter. The Department's position on the question of the income tax imposed by the Nanking Government is well understood by the Embassy, but the situation which has now arisen here, incident to the establishment of the new régime, presents a problem both complex and important from the point of view of recognizing the authority of the new régime. The matter of expediency or business policy would seem to be an important factor to be considered by the institutions concerned. LOCKHART 893.5123/65: Telegram The Secretary of State to the Counselor of Embassy in China (Lockhart) WASHINGTON, December 28, 1937—6 p. m. 411. Your 841, December 22, 6 p. m. In the light of the circumstances mentioned in your telegram under reference and of the Depart ment's instructions concerning the Chinese income tax, the Department feels that the question of the deduction by the Peiping Union Medical College, for payment to the new régime, of the Chinese income tax from salaries paid to officers and employees of the college is a matter for the institution concerned to decide. It is suggested that in replying to any request you may receive from the Peiping Union Medical College for advice in regard to this matter, you also state that this Government has not recognized the new régime, that the Chinese income tax is not applicable to American citizens, and that American organizations are under no obligation to collect the tax from their employees. In the event that you find it necessary to approach the authorities of the new régime in regard to income tax matters, you should bear in mind the Department's No. 400, December 15, 7 p. m.," particularly paragraph 1. Please keep Department informed of developments. HULL OBJECTION BY THE UNITED STATES GOVERNMENT TO CONFISCATION OF COPIES OF AN AMERICAN-OWNED NEWSPAPER AS AN INFRINGEMENT OF EXTRATERRITORIAL RIGHTS 811.5034 (China) Eastern Publishing Co./24: Telegram The Secretary of State to the Consul General at Shanghai (Gauss) WASHINGTON, May 13, 1937-1 p. m. 121. Reference your despatch No. 665, March 12,29 and previous correspondence in regard to the Eastern Publishing Company. Inasmuch as this case seems to be substantially on all fours with the case of the Searchlight Publishing Company (see correspondence between the Department and the Consulate General in regard to that case, particularly Department's telegrams No. 230, July 30, 2 p. m., and No. 247, September 8, 6 p. m., 1932 30), the Department would appreciate receiving from the Consulate General an explanatory statement of the grounds upon which the Consulate General has declined to intercede on behalf of the Eastern Publishing Company in an endeavor to obtain the return to the company of the copies and volumes of the Voice of China seized by the Chinese postal authorities. Please reply by naval radio. 28 Vol. III. p. 811. 29 Not printed. "Foreign Relations, 1932, vol. IV, pp. 656 and 660. 205655-54– -44 HULL 811.5034 (China) Eastern Publishing Co./25: Telegram The Consul General at Shanghai (Gauss) to the Secretary of State SHANGHAI, May 19, 1937-5 p. m. [Received May 19-10: 30 a. m.] 233. Referring to the Department's 121 of May 13, 1 p. m., I submit the following: The Eastern Publishing Company is conducted by Max Granich, an American citizen who has been publishing at Shanghai and circulating in China and abroad a radical magazine of a highly propaganda character to which the Chinese authorities have objected. Granich has admitted that the magazine is designedly anti-Japanese. Copies of the magazine have several times been seized from Chinese news dealers under orders of the Chinese court at Shanghai and have been confiscated under formal court proceedings. When Granich complained of this matter, alleging that the magazines were in the hands of dealers on consignment and remained his property until sold, the Consulate General told him that he might pursue his legal remedies if he so desired. See my despatch No. 220.31 31 In mailing copies through the Chinese Post Office, Granich was well aware of the fact that the Chinese authorities objected to the publication and dissemination of his magazine. He therefore assumed the risk of their mailing under such conditions. As the Department will recall from the Vanguard Press case 1935, seizures at a post office are not made by the postal authorities but by censors operating under the National Military Commission. While I [decline?] to assist Granich in the Post Office case, I may report that more recently an officer of the Shanghai Municipal Police asked my consent to the seizure of an entire issue of the magazine while en route from the printers, who unfortunately are also American, to the office of the publisher in the International Settlement. I declined emphatically to permit any such action, pointing out that it would represent an invasion of American property rights without due process in the court of competent jurisdiction. In this instance, of which Granich is of course not aware, I made the distinction between property in American possession and the situation where Granich well known [knowing] that the Chinese authorities objected to the dissemination of his magazine, knowingly and voluntarily entrusted dissemination to a Chinese Government agency-the Post Office. As has been fully reported to the Department, the Consulate General canceled the registration of the Eastern Publishing Company when the character of its activities became apparent. Those activities can not be considered in any way as advancing American interests or prestige in China. They are calculated to foment discord and to disseminate propaganda prejudicial to peace and good order and to the friendly relations between peoples and governments with which the American Government and people are at peace. I consider that such activities are a gross abuse of the privilege of extraterritoriality and that in pursuance of the Good Neighbor policy of the American Government no recognition, countenance or support should be given to Granich in such activities. The Department is aware that there is suspicion that the activities of Granich are being conducted in the interest of the Third Internationale. GAUSS 811.5034 (China) Eastern Publishing Co./28 The Consul General at Shanghai (Gauss) to the Secretary of State No. 853 SHANGHAI, June 25, 1937. [Received July 27.] SIR: With reference to the Department's telegram No. 121 of May 13, 1 p. m., and my reply No. 233 of May 19, 5 p. m., concerning the radical propaganda magazine the Voice of China, published at Shanghai by the Eastern Publishing Company owned by one Max Granich, an American citizen, I have the honor to report that early in June the Shanghai Municipal Police supplied the Consulate General a copy of the June first issue of the Voice of China and directed attention to the fact that it contained a statement that the publication is "registered with the Central Publicity Committee of the Kuomintang at Nanking." An officer of the Consulate General was informed that the Municipal Police were making inquiries to ascertain whether such registration had actually been effected. On June twelfth there was received from the Deputy Commissioner of Police (Special Branch), Shanghai Municipal Council, a copy of a confidential memorandum reporting the result of the inquiries made by the police. A copy of the memorandum is enclosed.32 The June fifteenth issue of the Voice of China has now been issued, a copy supplied to the Consulate General by the Municipal Police, and attention directed to the statement now appearing therein as follows: "Published twice a month by The Eastern Publishing Co., (An American Firm) 749 Bubbling Well Road, Shanghai, China. Registered with the Central Publicity Committee of the Kuomintang at Nanking, and with the Chinese Post Office as a newspaper, Registry No. 2306." *Not printed. |