| A central break in modern Chinese history is the country’s transformation from a traditional agricultural country to a modern industrial power. Industrialization is a new mode of production that is distinctly different from traditional modes of production, but how were funds raised in the process? If we say that Western countries had depended on colonial expansion and plunder for the primitive accumulation of capital, then for China, which was a semi-colonial and a semi-feudal country, where did the capital needed for modernization come from? As an important source of government revenue, taxation not only sustains the ordinary operations of government but also provides funds for large-scale construction and for modernization projects. At the same time, industrialization generates new sources of wealth and provides rich new sources of taxation for the government, it requires the establishment of a modern financial and taxation system. In other words, taxation provides the fiscal basis for modernization, but modernization in turn necessitates the reform of the tax system. As a consequence, we can describe the changes from a traditional to a modern tax system as tax modernization.This dissertation takes business tax, which was introduced from the West to replace the Chinese Li-kin, as the main object of study. I use original documents from archives including the Sichuan Provincial Archives, Chongqing Municipal Archives and the Shanghai Municipal Archives, as well as Republican period newspapers and periodicals. I also draw on knowledge and methods from the disciplines of history, economics, finance and taxation studies to study Chinese tax modernization both as institutions and in terms of its implementation. The dissertation elaborates on three relationships in Chinese tax modernization:firstly, the relationship between the traditional and modern tax systems; secondly, the tax relationship between the central government and the local government, and thirdly, the relationship between the government and taxpayers (or businesses). By doing so, I reveal the driving forces and limiting factors in tax modernization, and provide a new perspective in the research of the economic history, financial history and taxation history of modern China.This paper is divided into four parts in addition to the introduction and conclusion. The first part focuses on the process of dissolving the likin and the establishment of modern Chinese business tax, tracing the change to the new tax under the Nanjing National Government. The second part takes the Sichuan business tax as a case to study the reform of the local tax system during the Anti-Japanese War and its influence on local tax modernization. In doing so I also ask how local taxpayers succeeded in restricting the excessive expansion of the government’s power. The third part focuses on the central government’s efforts to take over and reform the business tax, and explores the impact of the center’s fiscal centralization on the modernization of the business tax system and its contribution to the Chinese struggle for national independence. The fourth part studies the reform of the local business tax and its consequences after the Anti-Japanese War, exploring in depth the local government’s loss of taxation powers and other setbacks in China’s path of tax modernization. Through the investigation on business tax modernization in different historical periods, this dissertation draws the following conclusions:Firstly, the relationship between the traditional and modern tax systems. Tradition and modern are relative concepts. Compared to Li-kin and Pawn tax, business tax belongs to modern tax, compared to farming tax system directly collected by tax authorities belongs to modern tax system. In modern society, what kind of tax to collect, how to collect tax, and how much tax to levy, shall comply with established legal norms, namely "collecting tax according to laws". Business tax system is a kind of tax system according to law as criterion, farming tax is the kind in which government and other units or individuals try to reach some sort of agreements beyond the laws. This tax collection mode is contrary to the modern tax system in the essence of legislation. Existence has its rationality. The reason why farming tax can exist and make up for the deficiency of directly collected by tax authorities is the result of western modern business tax system adapting to China’s national conditions, and it also shows that some factors of traditional tax system still has strong vitality in the modern tax system.Secondly, the tax relationship between the central government and the local government. Fiscal decentralization is a kind of popular financial system in modern countries. In China, the true meaning of fiscal decentralization between central government and local government began in the period of Republican China, after that, fiscal and taxation system changes between centralization and decentralization several times, business tax also changes from local tax to state tax, and from state tax to local tax, in which intertwines with fierce competition by central government and local government. During the period of Anti-Japanese War, central government centralized business tax rights of legislation, collection, administration, which can effectively reform the collection system to reduce tax cost and improve tax efficiency. The business tax modernization did not remain stagnant due to the tax right changes between central government and local government, but got further development as a result of the central fiscal authority.Thirdly, the relationship between the government and taxpayers (or businessmen). The taxpayers of the business tax is so wide that include those who engage in industrial and commercial operation, while most of them have been incorporated into the chamber of Commerce or business guild, forming an independent social force and owning the right to speak in tax affairs. These organizations are elected or recommended by taxpayers, reflecting taxpayers’ aspirations, safeguarding taxpayers’ interests, and restricting government’s tax power excessive expansion, which is an important performance for the farming of Chinese modern tax consciousness, as well as an important performance for China to become modern democratic taxation country. This shows that the government and taxpayers have formed a kind of mutual restriction mechanism. It is through the interaction between business groups and the government that the modern tax system can constantly be perfected.Generally speaking, as a modern tax imported from western countries, business tax occupies an important place in the history of finance and taxation in Republican China, and it also has special meaning in China’s modernization. The business tax replaced the local Li-kin and created a relatively loose tax policy environment for Chinese economic growth. Under the Kuomintang Government’s tax system, business tax and land tax functioned as the primary local tax system, providing many desperately needed funds for construction at the local level. During the Anti-Japanese War, the business tax became an important way for the government to increase taxes and to expand the direct taxation system, which played a key role in financing the war and made a positive contribution to Chinese national independence. Through studying these relationships in Chinese tax modernization, my dissertation concludes that Chinese tax modernization not only absorbed western institutions but also retained some of the marks of the traditional tax system. It was a system which evolved with changes in the country’s overall social, political, and economic situation.
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