From the late Qing to the 1920s, abolition of the likin was always a priority on the Chinese tax reform agenda. But it was not until the establishment of the Nanjing Nationalist Government (hereafter NNG) that the policy of “abolishing the likin and creating a new tax” (caili jiashui) was implemented in conjunction with the restoration of tariff sovereignty. The NNG secured high-revenue income by raising the tariff rate instead of promising abolition of the likin from the Western powers. To compensate for the loss of expected revenue loss due to the abolition of the likin, the NNG allocated land taxes to the local governments. However, Guangdong province, which was already highly commercialized, could not match the loss of the likin with gains from the land tax. This chapter examines how the Guangdong provincial government (hereafter, the GPG) responded to the central government's policy to abolish the likin in the 1930s by focusing on the creation of the “special tax.”

The origins of the special tax: Between the likin and tariffs

The special tax was a local tariff on foreign goods transferred to Guangdong province. However, in reality it was more complicated. First, it had the nature of a tariff in that it targeted imported goods. Second, it had the nature of the likin in that domestic cargo from other provinces could also be subject to this taxation.