The Sui Dynasty's chess game

Chapter 787
Fang Xuanling stood on the reporting platform in the center of the round hall and addressed the crowd: "The main points of this tax system are as follows: First, the land tax will be reduced from 1/20 to 1/30. The commercial tax will be changed from an income tax to a profit tax, and reduced from 5% to 3%, while also becoming a fixed tax system. Second, the household tax will be abolished. Third, the corvée labor system will be changed to a recruitment system. The reason for abolishing the household tax is that the highest annual household tax was only 4 million strings of cash, while last year our salt, wine, sugar, and tea taxes exceeded 10 million strings of cash. Therefore, it is entirely possible to abolish the household tax and reduce the burden on the people."

At that moment, a soft "clang!" rang out in the hall, the sound lingering in everyone's ears, and everyone looked towards the Emperor.

Emperor Xiao Xia put down his jade gavel and smiled, "Please allow me to add a few words!"

The hall fell completely silent. Xiao Xia slowly said, "The abolition of the household tax has a specific name: 'Equalization of the poll tax and land tax.' This not only reduces the burden on the people, but more importantly, it can effectively promote population growth. If a couple has three children, the family pays five strings of cash in household tax per year. If they only have one child, they only pay two strings of cash per year. The more people there are, the higher the household tax will be, which will seriously inhibit the people's willingness to have children. Therefore, the essence of equalization of the poll tax and land tax is to only tax property, not people. I believe that in just ten years, we will restore the highest population level during the Kaihuang era."

After a pause, Xiao Xia continued, "In fact, our salt tax and the other three taxes are taxes levied on people, but they are fairer. Even the prime minister needs to eat salt and has to buy salt and pay taxes like ordinary people. Household taxes will only lead to a decrease in population or the concealment of population, which will make it difficult for us to govern the country. We have just experienced a period of chaos, and the population has decreased sharply. The north is devastated. At this time, we need to reduce taxes and corvée labor, allow people to recuperate, and restore the population and people's livelihood that have been destroyed by the war as soon as possible."

Everyone nodded in agreement, finally understanding the Emperor's true intention: to abolish the direct population tax and instead levy taxes indirectly.

Fang Xuanling continued, “Let’s talk about the commercial tax reform. In the past, commercial taxes were based on income. Five percent tax may not seem like much, but in reality, the tax burden was very high. For example, if you had 100 strings of cash worth of goods and could make a profit of 10 strings of cash, but you would have to pay 5 strings of cash in taxes, which would take away half of your profit. Nobody could stand that. Merchants had no choice but to try every means to evade taxes, which led the government to set up checkpoints. There were hundreds of thousands of tax officials in the country. This not only restricted the flow of goods, but the tax revenue could not even cover the expenses of the tax officials.”

Previously, we exempted commercial taxes, but this was only a temporary measure and couldn't be implemented indefinitely. We need to reform it, changing the commercial tax to a profit tax, levied only on shops, with a fixed annual amount, which they would pay themselves at the county government. This way, we wouldn't need checkpoints or tax collectors, saving millions of strings of cash annually.

Su Wei asked, puzzled, "If only the shops are taxed, wouldn't the tax ultimately fall on the buyers?"

Fang Xuanling smiled and said, "Reporting to Grand Secretary Su, no matter how commercial taxes are levied, as long as merchants pay taxes, the burden will eventually fall on the buyers. Merchants have always regarded commercial taxes as part of their capital, and the purpose of tax evasion is to reduce their capital."

"I see. It seems I am quite ignorant."

Yuan Xiaoju asked with some concern, "Won't a drastic reduction in taxes affect the operation of the imperial court?"

Another jade chime rang out in the hall, and then silence fell once more.

Xiao Xia slowly said, "Yuan Zizheng's concerns are probably the concerns of many people. Let me explain again. Currently, the bulk of our tax revenue comes from salt, wine, sugar, and tea, which already accounts for 60% of our tax revenue. Therefore, exempting household tax and reducing land tax and commercial tax will not have a significant impact on us."

Secondly, we have many other sources of income, such as rent from government-owned land, the sale of government-owned land, taxes levied by the Maritime Trade Office on overseas goods, income from the sale of mutton and sheepskin by our Animal Husbandry Office, and income from the ships built by our Shipbuilding Office. These government incomes are already comparable to tax revenues, and these incomes are actually the government taking away the profits of wealthy merchants, with little impact on small and medium-sized merchants and ordinary people.

While our revenue is increasing, our military spending is decreasing because all soldiers receiving military pay are being discharged and returning to their hometowns. Currently, our 700,000-strong army consists entirely of conscripted soldiers, who exchange land for military service. This reduces annual military pay expenditure by 20 million strings of cash. Military spending has always been the largest expenditure of the imperial court, accounting for over 70% of total revenue. If we can significantly reduce military spending, we will have more money for education, various technological research and development, increasing crop yields, and medical research, greatly reducing child and pregnant woman mortality.

Tax reform is certainly not something that can be resolved in a single council meeting; it requires several rounds of repeated discussions and back-and-forth negotiations before various compromises can be reached. However, the emperor has already set the tone: "light taxes and levies, allowing the people to recuperate and thrive." No matter how the tax system is reformed, it must revolve around this principle.

In addition, there are time requirements. Xiao Xia requires that it be launched in November, then notified to all counties and prefectures across the country, and officially implemented in January of next year. However, the abolition of household tax will be implemented temporarily this year, issued by imperial decree, and all household taxes will be abolished this year.

When the news of the cancellation of this year's household tax spread to all counties and prefectures, the whole country was in an uproar. People everywhere were all smiles, and local governments also breathed a sigh of relief. Local governments could not collect household tax, but they had to do the work. They offended people in various ways and wasted a lot of energy and effort, leaving them exhausted every year.

The abolition of household tax has brought joy to everyone.

That morning, Xiao Xia was reviewing memorials in the Imperial Study as usual when Xie Ling, the secretary, reported at the door, "Your Majesty, Prime Minister Pei has important matters to discuss with you!"

Xiao Xia nodded, "Please let him in!"

Before long, Pei Ju hurriedly arrived at the imperial study, bowed and said, "Your Majesty, I have just received news that the Turkic Shibi Khan has passed away two months ago."

Xiao Xia was taken aback and asked, "Is the information reliable?"

"Your Majesty, the news came from a group of Uyghur merchants. I also consulted other grassland merchants and compiled various reports. The situation is now clear: the Turkic Shibi Khan was preparing to launch a surprise attack on the Hetao region with 50,000 of his personal cavalry, but he fell ill while crossing the Yin Mountains and subsequently returned to the capital. It is said that he died on the way back, but the news was concealed. Soon after, Princess Yicheng took over the reins, and his brother Chuluo Khan ascended to the throne."

Xiao Xia nodded and said, "That makes sense. The Sui army drove out the Turkic garrison, seized their warehouses, and took all their spoils. How could the Turkic Khan let it go? It's only natural that he would lead his army south!"

Pei Ju said with genuine shame, "My previous analysis was completely wrong!"

Xiao Xia smiled and said, "Your analysis is actually not wrong. You used the experience of the Qimin Khan era to analyze it, which is indeed correct. But you don't know that Shibi Khan established a direct guard of 50,000 men. He no longer needs to summon troops from various tribes. He can directly lead 50,000 direct troops south!"

Pei Ju sighed and said, "Your Majesty is right. This humble subject was indeed unaware that the Turks had established a direct guard!"

Xiao Xia took two steps with his hands behind his back and asked, "How much do you know about the newly enthroned Chuluo Khan?"

(End of this chapter)