Wind Rises in North America 1625

Chapter 314 Finance and Taxation
"The cause of the English bourgeois revolution, if we apply the history of the late Ming Dynasty, was actually the rebellion of the 'Scottish Tartars,' and the rampant 'bandits' within the country (at that time, farmers in the suburbs of London and many counties launched a large-scale anti-enclosure movement and tax resistance). In order to raise funds for the army, King Charles I of England had to bow to the 'Donglin Party' in England and adopted the strategy of 'befriending virtuous ministers and keeping away from sycophants' (i.e., convening a long parliament)."

"Subsequently, the British version of the 'Factory Guard,' that is, the Royal Court, was abolished by the 'Donglin Party (Parliament),' and the King's favorites, the Earl of Stratford and Archbishop Laud, were executed as if they were Wei Zhongxian. Finally, even King Charles I was sent to the guillotine by the 'Donglin Party (bourgeoisie)' who resisted taxes, in collusion with 'bandits,' that is, the so-called peasant revolutionary forces."

"During that period, in order to cope with the civil war, a group of British parliamentarians introduced two taxes: consumption tax and land tax. Of course, there was also a very important source of funds, which was the auction of the lands and other properties of the king, the church, and nobles who were openly hostile to Parliament, thus raising a large amount of financial funds."

"Through these measures, Britain's fiscal revenue improved rapidly, which enabled the formation of a parliamentary army of tens of thousands, laying a solid material foundation for winning the civil war."

"Generally speaking, Britain's fiscal revenue started with 'land sales,' which was actually a combination of 'land finance' and the later 'recovery of stolen goods and extortion' by the rebel leader Li Zicheng."

“Besides smuggling, the most important source of revenue for Xinhua is ‘land finance,’ which is to collect 15% agricultural tax from immigrants by providing them with farmland, as well as interest income from various agricultural loans to immigrants.”

"As for the suggestion by some people to mine gold and mint gold coins to directly supplement the treasury, I think it is extremely absurd and ridiculous, and it is a structural destruction of Xinhua's fiscal system!"

On December 20, 1635, a preparatory meeting for the Congress of Representatives was held. Heads of various departments of the Decision-Making Committee gathered in the council hall of the government building to "check the accounts" of the progress of the government's work this year, so as to report to all representatives more comprehensively and directly.

Unexpectedly, amidst the reports of excellent results from all departments, a discordant voice emerged.

In front of many senior members of the committee, Finance Committee member Deng Zhichen bluntly pointed out that Xinhua's current fiscal and tax issues were a complete mess, with no clear distinction between government and enterprise, public and private interests, and an unclear tax system. Moreover, there was no clear and explicit fiscal and tax system at all.

No ministry or commission has any concept of budget or final accounts. Even if they do, it is extremely crude and vague, and cannot be used as reference data for the national annual final accounts.

The committee leadership also disregarded the finance and taxation department under his jurisdiction and failed to comply with the fiscal policies formulated over the years, seemingly treating the Ministry of Finance as merely an accountant and money manager.

What's even more worrying is that if Xinhua's population weren't small and many commodities weren't subject to some degree of price and transaction controls, given the current disorderly fiscal and tax system and the rampant issuance of currency, severe inflation would probably have already occurred.

As for government tax revenue, it's an even bigger mess.

More than ten large industrial and mining enterprises and trading companies controlled by the government often have their annual profits not even going through the Ministry of Finance, but being directly borrowed or misappropriated by other departments or local governments.

Moreover, there is a lack of necessary financial oversight during the use of funds.

In later generations, some people have said that this world is actually just a huge makeshift operation.

In Deng Zhichen's view, although Xinhua has established itself as a nation and has successively added several government functional departments, it is still a "small mountain village" with extremely irregular management.

In fact, compared to other time travelers, Deng Zhichen has kept a low profile over the past ten years, and has even been somewhat unknown.

But before becoming a naval cadet, he was a typical rich kid, the kind whose family owned a mine.

But he chose to take the entrance exam for the Naval Academy and become a reserve officer.

After arriving in this world aboard the "Breaking Waves," I was quite depressed for a while.

In the initial development stage, other trainees either led troops into battle, bravely explored local areas, or at the very least took up leadership positions in state-owned enterprises, contributing to the industrial and commercial development of Xinhua.

Born into a wealthy family, Deng Zhichen has developed some business acumen from a young age and should logically be in charge of Xinhua's trade affairs.

However, the committee director Luo Zhenhui and deputy director Li Xianqing appointed him as the head of government finance, on the grounds that he had been good at managing money since childhood.

He had boasted to his classmates many times that he had amassed assets worth hundreds of thousands of yuan when he was in elementary school, and after years of management, he had grown the money to nearly ten million yuan before he was admitted to the Naval Academy.

Well, since you're good at managing money and have been dealing with money since you were a child, then you should manage the purse strings for the Xinhua government.

Deng Zhichen was stunned for a long time after receiving the appointment.

No, I've been dealing with money since I was a child because my elders kept giving me money!

As for wealth management, claiming to have grown from hundreds of thousands to nearly ten million in assets is just me bragging; don't take it seriously.

As for being able to understand corporate financial statements and compile accounting tables, that's just a superficial understanding for me. I'm really not an expert in financial management!

Seeing that other transmigrators were doing very well in various industries and departments, Deng Zhichen naturally couldn't back down and say that he couldn't do it.

That's right, a man should never say he can't do it.

So he had no choice but to bite the bullet and start working on financial management, becoming the head steward of the entire Xinhua.

Fortunately, when I first took over, Xinhua was not a large organization, with a population of about a thousand, three or five industrial and mining enterprises, and the rest were all reclaimed land for farming, so the financial management work was relatively simple.

In this world, most people are not very competent when they first take on a job. They usually learn by doing, figuring things out on their own, and gradually get the hang of it. Eventually, they summarize and generalize their own work ideas and establish a decent set of processes and systems.

A country's fiscal system is nothing more than issues of revenue, expenditure, budget, and the introduction of corresponding fiscal policies based on economic development to rationally regulate the overall national economy.

However, when it comes to specific issues such as taxation, debt and non-taxation, as well as recurring expenditures, capital expenditures, social security and welfare, and public investment, it is a very professional and complex social management system that requires overall planning and comprehensive consideration.

Neglecting any minor detail can trigger a chain reaction, leading to an imbalance in the entire economic system.

After years of dedicated study, and drawing on fragments of the national financial system from his recollections of later generations, Deng Zhichen single-handedly developed a financial management system that was relatively suitable for the current situation in Xinhua.

However, although Xinhua has been established for over ten years, most departments and personnel still maintain a rough-and-ready development approach. Forget about a refined financial system; even their methods of handling affairs are quite irregular. In many people's eyes, as long as things are ultimately accomplished well, meticulous management during the process is unimportant.

This management method is typical of military style, simple and brutal.

Oh, speaking of military discipline is a bit inappropriate.

Because when the military is in combat, a large number of professional staff officers are assigned tasks in a reasonable manner. They consider many favorable or unfavorable factors, and conduct simulations and predictions of the entire war. Then, based on changes on the battlefield, they make timely and targeted deployments. The entire battle plan is formulated in an extremely detailed and scientific manner.

However, the operating style of many ministries and local governments under Xinhua is quite different from that of the Ministry of Finance. They seem to be still in a primitive and extensive stage, and they are very impatient with the series of management systems formulated by the Ministry of Finance, which they regard as a kind of constraint and restriction on the operation of their respective departments.

In today's turbulent world, with colonial expansion in full swing, we need to roll up our sleeves and get things done quickly and efficiently, without letting red tape hinder our progress.

As the head of the finance department, Deng Zhichen felt helpless and somewhat dissatisfied with this situation.

In fact, whether in previous dynasties or in modern society, the most important department in the central government is the one in charge of personnel, followed by the department in charge of finance and taxation.
Could it be that Xinhua's Ministry of Finance is just a marginal department that does nothing more than "playing a minor role"?
When the preparatory meeting for the general assembly of all transmigrators was held, while various departments were smugly reporting on their great achievements, Deng Zhichen, who had been depressed for a long time, couldn't help but start criticizing the committee members. He bluntly criticized the chaotic and disorderly financial management of Xinhua's various departments and regions, and also subtly pointed out to the committee leadership that a healthy and reasonable financial system plays an indispensable role in Xinhua's future development.

Xinhua is, after all, a country, and its future goal is to become a powerful and civilized modern nation. Therefore, all affairs must be brought under formal management, and not treated like a makeshift organization, which is crude and disorderly.

When faced with Deng Zhichen's accusations and criticisms, the committee members present were initially taken aback, and then their expressions varied.

Although this head housekeeper usually seemed a bit nagging and always chattering in front of them, she always had a very good temper and rarely showed such enthusiasm.

Why did he suddenly lose his temper today, not only emphasizing the importance of financial management but also criticizing all departments? It's truly unexpected.

In many people's eyes, the Ministry of Finance is just a purely logistical support department. In terms of importance, which of the ministries is not more important than the Ministry of Military Affairs, the Ministry of Foreign Affairs and Trade, the Ministry of Science, Technology and Industry, the Ministry of Civil Affairs, the Ministry of Immigration and Colonization, the Ministry of Agriculture, Forestry and Animal Husbandry, and the Ministry of Health, Culture and Education? Even the newly established Ministry of the Interior is probably more important than it.

However, it is not surprising that they look down on the Ministry of Finance, because they have never dealt with it before and lack a certain understanding of finance.

After all, before this, everyone was either a naval instructor or a naval cadet, so they had no knowledge of basic financial knowledge and systems.

To date, Xinhua's main fiscal revenue can be roughly divided into three categories: tax revenue, non-tax revenue, and government debt.

Tax revenue mainly includes business tax and income tax of state-owned enterprises and private workshops and trading companies (a very small number) within the country.

Since Xinhua has a relatively small number of industrial and mining enterprises, its tax base is also very small. The annual tax revenue is only a meager 20,000 to 30,000 yuan, which is negligible in terms of the government's overall revenue.

The bulk of Xinhua's fiscal revenue comes from non-tax revenues, namely the profits turned over by government-controlled factories and trading companies.

For example, the Northern Trading Company had an annual income of over 300,000 yuan from the fur trade, and paid more than 100,000 yuan in profits.

For example, the Americas Trading Company (i.e., a smuggling company) had an annual operating income of over one million yuan and paid over 250,000 yuan in profits.

State-owned enterprises, for various reasons, suffer both policy-related losses and market-driven profits. Overall, however, they are an important pillar supporting Xinhua's national economy and contribute a considerable amount of revenue to the government's finances, roughly between 50,000 and 60,000 yuan.

As for government debt, it falls under the category of abnormal fiscal revenue and is generally incurred when the government faces unexpected fiscal expenditures.

For example, a few years ago, the Portuguese in Macau sent four or five ships to transport Ming Dynasty immigrants to Xinhua. In order to pay the huge transportation costs, the government had to temporarily borrow gold coins worth 220,000 yuan from Xinhua Precious Metals Company.

Although this money is still part of Xinhua's assets, it exists in the name of government debt.

In addition, to cope with the Spanish invasion, the government borrowed another 200,000 euros to purchase military equipment and pay military salaries and compensation for the wounded and the injured.

To the untrained eye, Xinhua Precious Metals Company is a government-controlled enterprise, specializing in the mining, smelting, and minting of coins at the Jinsha River gold mine, and should not be so closely separated from government finances.

Calling this a debt is simply a matter of transferring money from one hand to the other, circulating within the Xinhua economic system. Yet, it's unnecessary to record it as a debt in the treasury.

However, according to a "proper" national fiscal system, the huge sum of money generated from gold mining cannot be regarded as general fiscal revenue.

Overall, Xinhua's local fiscal revenue, plus the smuggling and fur trade with Japan by the Beiying Island Colonization Team and the grain trade by Xinhua Mainland Trading Company, was approximately 70 to 80.

For a small country with a population of only fifty or sixty thousand, this is definitely among the world's high-income countries.

However, Xinhua's financial expenditures are also extremely large.

The most significant expenditure was on immigration, including transportation, security, supplies, "public relations" expenses, procurement costs (mainly for special personnel such as craftsmen and young women), crew salaries, personnel losses, and many other related expenses, which accounted for more than half of the total fiscal revenue.

In addition, after arriving in Xinhua, immigrants also have to pay subsequent settlement fees, material consumption fees, and other indirect costs such as medical care, epidemic prevention, education, and settlement.

After deducting immigration expenditures, what remains are general fiscal expenditures such as local town and village construction, road construction, dock construction, education, health, new land development, defense, and government personnel salaries.

After calculating this every year, Xinhua's finances are practically nonexistent.

Moreover, in order to accelerate development, the Xinhua government often adopts a "quantitative easing" monetary policy, which means increasing investment in various domestic affairs by expanding the fiscal deficit, so as to promote the leapfrog development of all aspects of Xinhua's undertakings.

So, in order to meet the needs of future development, shouldn't we establish a strict and standardized fiscal system to clarify the somewhat chaotic domestic tax revenue, government expenditure, and budget system?
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(End of this chapter)