The Fight for the Republic in China

by B. L. Putnam Weale

TARIFF REVISION IN CHINA

The following is a translation of a memorandum prepared by the Ministry of Agriculture and Commerce regarding abolition of likin and an increase of the Customs duties:—

THE MEMORANDUM

"Disproportionate taxation on commodities at inland towns and cities tends to cripple the productive power of a country. Acting upon this principle, France in the 17th, England, America, Germany and Austria in the 18th Century abolished such kind of taxation, the Customs tariff remaining, which is a levy on imports at the first port of entry. Its purpose is to increase the cost of production of imported goods and to serve as a protection of native products (sic). Raw materials from abroad are, however, exempt from Customs duty in order to provide cheap material for home manufactures. An altogether different state of affairs, however, exists in this country. Likin stations are found throughout the country, while raw materials are taxed. Take the Hangchow silk for instance. When transported to the Capital for sale, it has to pay a tax on raw material of 18 per cent. Foreign imported goods on the other hand, are only taxed at the rate of five per cent ad valorem Customs duty at the first port of entry with another 2.5 per cent transit duty at one of the other ports through which the goods pass. Besides these only landing duty is imposed upon imported goods at the port of destination. Upon timber being shipped from Fengtien and Antung to Peking, it has to pay duties at five different places, the total amount of which aggregates 20 per cent of its market value, while timber from America is taxed only ten per cent. Timber from Jueichow to Hankow and Shanghai is taxed at six different places, the total amount of duty paid aggregating 17.5 per cent., while timber imported from abroad to these ports is required to pay Customs duty only one-third thereof. The above-mentioned rates on native goods are the minimum. Not every merchant can, however, obtain such special 'exemption,' without a long negotiation and special arrangements with the authorities. Otherwise, a merchant must pay 25 per cent of the market value of his goods as duty. For this reason the import of timber into this country has greatly increased within the last few years, the total amount of which being valued at $13,000,000 a year. Is this not a great injustice to native merchants?

THE CHINESE METHOD

"Respecting the improvement of the economic condition of the people, a country can hardly attain this object without developing its foreign commerce. The United States of America, Germany and Japan have one by one abolished their export duty as well as made appropriations for subsidies to encourage the export of certain kinds of commodities. We, on the other hand, impose likin all along the line upon native commodities destined for foreign markets in addition to export duty. Goods for foreign markets are more heavily taxed than for home consumption. Take the Chekiang silk for instance. Silk for export is more heavily taxed than that for home use. Different rates of taxation are imposed upon tea for foreign and home markets. Other kinds of native products for export are also heavily taxed with the result that, within the last two decades, the annual exports of this country are exceeded by imports by over Tls. 640,000,000,000. From the 32nd year of the reign of Kuang Hsu to the 4th year of the Republic, imports exceed exports on the average by Tls. 120,000,000. These, figures speak for themselves.

LIKIN

"Likin stations have been established at places where railway communication is available. This has done a good deal of harm to transportation and the railway traffic. Lately a proposal has been made in certain quarters that likin stations along the railways be abolished; and the measure has been adopted by the Peking-Tientsin and Tientsin-Pukow Railways at certain places. When the towns and cities throughout the country are connected by railways, there will be no place for likin stations. With the increase in the number of treaty ports, the 'likin zone' will be gradually diminished. Thencefrom the proceeds from likin will be decreased year by year.

"Owing to the collection of likin the development of both home and foreign trade has been arrested and the people are working under great disadvantages. Hence in order to develop foreign and home trade the Government must do away with likin, which will bring back business prosperity, and in time the same will enable the Government to obtain new sources of revenues.

"From the above-mentioned considerations, the Government can hardly develop and encourage trade without the abolition of likin. By treaty with Great Britain, America and Japan, the Government can increase the rate of Customs tariff to cover losses due to the abolition of likin. The question under consideration is not a new one. But the cause which has prevented the Government from reaching a prompt decision upon this question is the fear that, after the abolition of likin, the proceeds from the increased Customs tariff would not be sufficient to cover the shortage caused by the abolition of likin.

COST OF ABOLITION OF LIKIN

"But such a fear should disappear when the Authorities remember the following facts:—

(a) "The loss as the result of the abolition of likin: $38,900,000.

(b) "The loss as the result of the abolition of a part of duty collected by the native Customs houses: $7,300,000.

(c) "Annual proceeds from different kinds of principal and miscellaneous taxes which shall be done away with the abolition of likin $11,800,000.

"The above figures are determined by comparing the actual amount of proceeds collected by the Government in the 3rd and 4th years of the Republic with the estimated amount in the Budget of the fifth year. The total amount of loss caused by the abolition of likin will be $58,000,000.

INCREASE OF CUSTOMS TARIFF

"The amount of increase in the Customs tariff which the Government expects to collect is as follows:—(a) The increase in import duties $29,000,000. (b) The increase in export duties Tls. 6,560,000.

"The above figures are determined according to the Customs returns of the 2nd, 3rd, and 4th years of the Republic. By deducting Tls. 2,200,000 of transit duty, the net increase will be Tls. 33,600,000, which is equal to $48,500,000. For the sake of prudence, allowance of five per cent. of the total amount is made against any incidental shortage. The net revenue thus increased would amount to $46,100,000. Against the loss of $58,000,000, there will be a shortage of some $11,900,000. This, however, will not be difficult to make good by new sources of revenue as the result of a tariff revision:—(a) Tax on goods at the time of manufacture $800,000. (b) Tax on goods at the time of sale $8,000,000. (c) Tax on cattle and slaughtering houses $2,000,000. (d) Tax on foodstuffs $4,000,000.

"Under (a) and (b) are the taxes to be collected on native made foreign imitation goods and various kinds of luxurious articles. Under (c) and (d) are taxes which are already enforced in the provinces but which can be increased to that much by reorganizing the method of collection. The total sum of the proceeds set forth under above items will amount to $14,800,000. These will be quite sufficient to cover the loss caused by the abolition of likin.

A VITAL INTEREST

"As the abolition of likin concerns the vital interest of the merchants and manufacturers, it should be carried out without delay. The commercial and industrial enterprises of the country can only thrive after likin is abolished and only then can new sources of revenue be obtained. This measure will form the fundamental factor of our industrial and economical development. But one thing to which we should like to call the special attention of the Government is the procedure to be adopted to negotiate with the Foreign countries respecting the adoption of this measure. The first step in this connection should be the increase of the present Customs tariff to the actual five per cent ad valorem rate. When this is done, proposals should be made to the Powers having treaty relations with us concerning the abolition of likin and revision of Customs tariff. The transit destination duties on imported goods should at the same time be done away with. This would not entail any disadvantage to the importers of foreign goods and any diplomatic question would not be difficult of solution. Meantime preparatory measures should be devised for reorganizing the method of collecting duties set forth above so that the abolition of likin can take place as soon as the Government obtains the consent of the foreign Powers respecting the increase of Customs tariff."