Rise of a Lonely City: From Exiled Prince to Ruler of the Nine Provinces

The prosperity of the border town and the proliferation of workshops brought about a new challenge: how to rationally and effectively obtain fiscal revenue from this increasingly active and large-scale economic activity to maintain the operation of the regime and support various construction projects.

In the past, Hanyuan's fiscal revenue mainly relied on the monopoly profits from the salt and iron monopoly, a portion of land tax, and limited city taxes.

These incomes were quite substantial when Hanyuan was first established and had a small population.

However, with the explosive growth of the population and the expansion of the army, especially the full-scale implementation of costly projects such as Zhenbeicheng, water network, official roads, and military settlements, coupled with the huge "work-for-relief" food and wages continuously invested to absorb refugees and stabilize society, the original income structure has become increasingly strained.

Although the treasury is temporarily full due to the grain trade in Jiangnan and the profits from border markets, it is not a long-term solution to simply sit around and wait for resources to run out. It is necessary to develop more stable sources of revenue with greater growth potential.

After repeated calculations and deductions with Han Lie, officials from the Ministry of Revenue, and some skilled accountants from the common people, and after referring to the tax systems of various regimes collected by Night Owl, Xiao Chen decided to officially levy commercial taxes in the core area controlled by Han Yuan and its affiliated official roads, water transport hubs, and major markets.

This "commercial tax" is not a simple double taxation, but a relatively systematic tax system designed to take into account the commercial process. Its core principles are "broad tax base, low tax rate, convenient collection, and promotion of circulation".

Tax systems are mainly divided into three categories:

I. Market Tax: Goods transactions conducted within the "markets" designated by the government are taxed based on the transaction amount, with a tax rate of "one-thirtieth," split equally between the buyer and seller.

Small transactions were exempt from taxation. The Market Administration Office would send personnel to the market to collect taxes. Transactions had to use standard scales and rulers supervised by the government, and a "deed" bearing the seal of the Market Administration Office was required as proof of the transaction. This served as both the basis for tax collection and as a transaction certificate, thus reducing disputes.

II. Customs Duties: Tax checkpoints set up at major official road checkpoints and waterway wharves within Hanyuan territory levied a transit tax of "one-fifty-year tax" on the goods carried by passing caravans and cargo ships, based on the value of the goods.

The tax rate is halved for goods produced locally, held by a local resident with a valid travel permit, and circulated within Hanyuan.

Special materials such as grain, salt, and military equipment can be exempted from or subject to reduced taxes upon presentation of the relevant official document.

The purpose of setting up tax checkpoints is to collect taxes, and they also serve to investigate smuggling and track logistics.

3. Residence Tax: For merchants who have fixed shops, workshops, warehouses, inns, carriage and horse shops, etc. in Hanyuan, engaged in commerce, service and processing industries, an "annual tax amount" shall be determined according to their business scale, industry and location, and shall be paid in quarterly installments.

The tax amount is determined by taking into account factors such as the size of the shop, the number of employees, and the prosperity of the area. The assessment is conducted jointly by the Market Management Office, the Market Supervisor, and industry leaders to ensure fairness. Newly opened businesses and small businesses facing genuine difficulties can apply for tax reduction or deferral.

To facilitate tax collection and prevent officials from embezzling funds, Xiao Chen also adopted several supporting measures: recruiting literate and arithmetic-skilled individuals, training them, and appointing them as tax officials with fixed salaries, strictly prohibiting "tax bundling"; implementing "three-part tax receipts," one copy for the taxpayer, one copy for the tax collection point, and one copy for the Ministry of Revenue's record-keeping, with regular verification; setting up "fair scales" and "standard rulers" in major markets and tax checkpoints for merchants to calibrate themselves, preventing tax officials from tampering with weights and measures; and establishing "complaint boxes" to allow merchants to complain about unfair tax collection, with tax officials severely punished and complainants rewarded if their complaints were verified.

Before the new tax system was promulgated, opinions were widely solicited from the heads of various market guilds and major merchants, and adjustments were made to those parts that were too harsh or impractical.

When it was promulgated, it was accompanied by detailed explanations and examples, and a one-month "promotion period" was given to allow businesses and the public to understand and adapt.

Nevertheless, the news of the new tax has caused quite a stir in the business community. Tax increases are always a sensitive topic in any era.

Some businessmen complained about increased costs and thinner profits; some vendors worried about their livelihoods being affected; and some smugglers sensed that their source of income was about to be cut off.

But Xiao Chen and Han Lie had anticipated this.

They understood that compared to the exorbitant taxes levied by the previous dynasty and surrounding powers, often reaching "one-tenth," "one-fifth," or even higher, along with the exploitative practices of officials, Han Yuan's tax rates of "one-thirtieth" or "one-fiftieth" were considered "light and lenient," and the collection process was designed to be transparent and standardized. More importantly, what did Han Yuan offer?

It is a safe trade route where bandits have disappeared, a smooth and sturdy cement road and an increasingly smooth waterway, a market that is becoming more and more prosperous and its consumption capacity is constantly increasing, and a relatively fair judicial environment that protects legitimate businesses.

These hidden reductions in "costs" and increases in "benefits" are something that no amount of high tax rates can bring about.

On the first day of tax collection, the markets and tax checkpoints were somewhat tense, and the tax collectors were especially cautious.

But order was quickly established.

Most law-abiding businessmen, after calculating their actual tax burden, found that it was indeed not high and saved them a lot of unnecessary "bribes" and risks, so they accepted it readily and registered, paid taxes, and received tax invoices as required.

Transactions at the market were not significantly affected; in fact, with the "deeds" serving as proof, disputes seemed to have decreased. At the tax gates, caravans lined up in an orderly fashion to have their taxes inspected and paid.

A month later, the preliminary results of the first commercial tax collection were compiled and sent to the Department of Finance.

The figures were hard for Han Lie to believe – the actual tax revenue collected in the first month from just the city tax and customs duties was already close to 30% of the previous monthly profit of the salt and iron monopoly!

And this is just the beginning. As commercial activities become more active and the collection system is improved, this number will inevitably continue to grow.

The housing tax, which is collected quarterly, has not yet been reflected in the tax revenue, but it is expected to be substantial.

"Your Highness, it's done! The commercial tax... is done!" Han Lie held the account book, his old face flushed with excitement.

This is not just a huge sum of money, but also means that Hanyuan's financial system now has a healthy and sustainable "source of income" and no longer relies excessively on a single source of revenue.

With this money, many things that we wanted to do but didn't dare to do before, or that were progressing slowly, can now be accelerated.

Looking at the encouraging numbers in the ledger, Xiao Chen breathed a sigh of relief.

That was the right move.

The successful imposition of commercial taxes not only signified fiscal stability, but also marked the beginning of the true formation of a "nation" for Hanyuan, a regime that originated from refugees and border troops—possessing the ability to regulate the extraction of social resources, provide public services, and build upon this foundation for long-term development.

"Selected items of the first month's commercial tax revenue and its use will be publicly displayed at various markets and city gates."

Xiao Chen instructed, "Let the merchants and common people know that every penny of tax they pay will be used to build cities to protect their homes, repair roads for travelers, train soldiers to defend against foreign aggression, and establish schools to educate their children. Taking from the people and using for the people is the way to last."

The flow and distribution of wealth is the lifeblood of political power.

Han Yuan is tying his first solid knot on this lifeline.