Volume 4: Hot! The whole world is a warring state Chapter 725: Tax Cuts After Interest Rate Cuts
Before Zhu Youdong traveled through time, he once served a very diligent leader: this leader worked at least sixteen hours a day in the hospital and never had the concept of holidays. He was also a very upright person and always maintained the bottom line on major issues.
However, although he was diligent, the internal management of the hospital was still very uneven, and the hospital's efficiency and employee enthusiasm were also very poor. In the annual democratic evaluation and secret ballot of employees, he often received the lowest democratic evaluation score among hospital leaders.
Why is this? Because this leader is too meticulous. As the dean, he even has to decide the height of the hooks on the toilet cubicles for patients to hang their infusion bottles when they go to the toilet. As a result, all the deputy positions, middle-level managers, and even ordinary employees have no enthusiasm or initiative in their work. The final result is that even if the dean works himself to death, he still can't manage the hospital well.
It is impossible for the head of a hospital with a few hundred people to do everything himself. Not to mention that Zhu Youdong is now in charge of a huge country with a population of more than 100 million people and 250 million people in vassal states.
Therefore, his working style is always to set the tone and then look at the results. As for the process and details, he doesn't care.
After leaving Li Guojun and Cao Sanxi to discuss the various details of setting up a bank with the four wealthy businessmen, he rushed back to the imperial city, where Prime Minister Ma Shiying was already waiting for him.
"Your Ma Shiying pays respect to His Majesty."
"Please excuse me, Mr. Ma, and take a seat."
After the king and his ministers sat down, Zhu Youdong cleared his throat and said, "We have just reached an agreement with the four major chambers of commerce in Fangshan. They will raise at least 50 million yuan to establish four banks."
"Your Majesty, this is very good. In this way, the bank deposit and loan business of our Ming Dynasty can be extended to the village level. According to my estimation a few days ago, at least more than 500 million funds can be mobilized."
"Hmm..." After a brief pause, Zhu Youdong asked, "Has Spain replied? Do they want these 200,000 prisoners?"
"The Ministry of Foreign Affairs just reported that the Western bandits have accepted our offer of 213 million, and they will pay the full amount within three months."
"Great! Now the navy has money to build ships."
"Uh, Your Majesty, I may not have heard you clearly. Do you mean that after we get the ransom, we should give it all to the navy?"
"Yes. But it's not all given at once. It's paid annually. This year, because of the donations from Cao Sanxi and others, we won't pay. Starting next year, 45 million will be allocated every year for four years. In fact, we still can't spend all the 200 million. "
"Your Majesty, the Ming Dynasty spent more than 100 million yuan to redeem the captives. You paid all this money yourself. What I mean is, when the ransom of the Western bandits comes, should we first repay the ransom you paid in advance?"
"Eh? If Prime Minister Ma hadn't mentioned it, I would have almost forgotten about it. Well, it's okay, you don't have to pay it back. Most of that money was the legacy of the Grand Emperor. Now the Grand Empress Dowager is gone, and my uncles are all rulers of their own countries, so they have long since separated. So even if I return this money, it will have no owner. Why not merge it into the national treasury and let them create greater value."
"Thank you, Your Majesty." Ma Shiying stood up sincerely and bowed deeply. Then he said, "In this case, I plan to invest the two hundred million yuan in the four major private banks and buy a certain amount of shares. In this way, I can send accountants to check the accounts openly. As for the navy's appropriation next year, if the four major private banks are unable to provide dividends next year, I will go for a loan then."
"It's up to Prime Minister Ma to make the arrangements himself. In short, the Navy's shipbuilding plan must be completed without compromise."
"Yes, Your Majesty, please rest assured that it will not hinder the growth of the navy."
Zhu Youdong nodded, indicating that the matter was over, and took a sip of tea: "Prime Minister Ma, the four bank licenses were just confirmed in Fangshan in order to further concentrate private funds so as to stimulate domestic demand through various large-scale projects. But to stimulate domestic demand, large-scale project construction alone is not enough."
"Your Majesty, the cabinet has discussed this before. In the end, everyone reached a consensus that we should reduce interest rates and taxes."
"How much will the interest rate be cut? How much will the tax be cut?"
"Your Majesty, since the court established the Ming Royal Bank, the deposit and loan interest rates have been constantly changing. In recent years, due to the loss of India and the cessation of maritime trade in the South China Sea, the national economy has fallen into difficulties. Many depositors have withdrawn their funds from the bank and taken them home to deposit. In order to further attract deposits, the deposit interest rate last year was the highest. The interest rate for current deposits reached 2.88%, and the one-year fixed deposit was 10.08%. Because the deposit interest rate is high, the loan interest rate is naturally high. Generally speaking, the loan interest rate of my Royal Bank is 5 basis points higher than the deposit interest rate... Last year, the three-year loan interest rate of the Royal Bank was 16.1%.
Such high interest rates have indeed attracted money back to the banks. But it has also greatly dampened people's enthusiasm for loans. After all, it is not easy to find a business that can provide more than 20% net profit every year these days."
Therefore, it is still disadvantageous for an emperor to not do everything himself: although this protects the enthusiasm of his subjects, such a high interest rate will greatly suppress production and consumption.
Of course, the war was tense in the past few years, and the country had to concentrate all its strength to deal with the invasion of Europeans. It was right to suppress social consumption and production and concentrate limited funds in the hands of the court. But now, it is indeed time to adjust.
"So how is the cabinet going to adjust?"
"According to the consultations of the Bank of China, the Ministry of Finance, the Ministry of Taxation, the Ministry of Industry and Commerce, the Ministry of Heavy Industry, the Ministry of Light Industry and other departments, we all agree that we will start to cut interest rates this year, and reduce deposit and loan rates in three stages. The interest rate on demand deposits will be reduced to around 1.5%, and all other rates will be reduced by at least five basis points."
"...Yes, if this is not enough, we can adjust it again next year."
"Thank you for your affirmation, Your Majesty."
"So, what about tax cuts?"
"Your Majesty, the agricultural and commercial taxes in our Ming Dynasty are basically 5% tax to 1%. The cabinet wants to increase the commercial tax to 6% tax to 1, and the agricultural tax to 7% tax to 1 in two years."
The Chinese Empire, through all dynasties, mainly relied on agricultural taxes to support the state machinery. On the surface, the emperors of each dynasty, as long as they were not too bad, treated the peasants very well. Generally speaking, the agricultural taxes of the dynasties of the Chinese Empire were 15% or even lower.
But it should be noted that this 15% tax is the land tax. In addition to the land tax, the peasants of the Chinese Empire also had to bear the head tax, corvée, military service and various temporary levies. Moreover, due to the heavy taxes, the burden on the peasants was often greatly increased due to the manipulation of the clerks.
Therefore, the 15% tax was often 1% or even 2% when it came to implementation. In the end of some dynasties, such as the Chongzhen Dynasty in the historical plane, it was 3% or even 4% or 5% of the tax.
Under Zhu Youdong, the Ming Dynasty had two characteristics in collecting agricultural taxes. The first was that it was collected based on the land area and land quality. The upper fields were charged five silver jiao per mu, the middle fields were charged three silver jiao, and the lower fields were charged one silver jiao. On average, it was basically three silver jiao per mu. According to the average grain yield of one mu of land in the Ming Dynasty, which was about 3 shi, and worth 1.5 yuan of silver, the tax of three silver jiao per mu was almost five-to-one.
The second characteristic is that the agricultural tax in the Ming Dynasty is very simple: there is only a land tax, nothing else! This has great benefits: as long as farmers know how much land they have, they know how much tax they should pay every year. Grassroots civil servants also have an easy job, and they no longer have to argue with farmers every year.
Since the Ming Dynasty has now completely entered the Little Ice Age, natural disasters are frequent , and the court often exempts taxes and even gives money for relief. So even though the annual income of the Ming Dynasty court often fluctuates around 400 million, the proportion of agricultural taxes has been getting smaller and smaller. Therefore, when Ma Shiying said that the agricultural tax should be reduced to 70%, the court officials did not feel much: it was just a few million less. If the farmers were allowed to deposit the extra money or spend it on industrial products, the extra money would be earned back.
But business tax...
"Your Majesty, this is what I think. First, lower the commercial tax to stimulate the people to actively set up factories and do business. With more factories, the population will gather in towns, and the urban area will naturally expand. At that time, the consumption of construction will rise. With more houses, the demand for electricity will also increase, and the newly acquired power plant technology of the court will also be put to use. After a few years, when the population of towns increases, I will adjust the tax rate or add new commercial taxes. In this way, the income of the court should be able to double in the future... Your Majesty, why are you looking at me like this?"
What are you doing? Are you a time traveler? You're even thinking of real estate.
But to be honest, it is still too early for Daming to develop the real estate industry. However, the idea is right to stimulate the development of private light industry and service industry, promote the expansion of towns, and then promote consumption.
"I am generally satisfied with the cabinet's plan, but after the tax cut, the court's income will be greatly reduced in a short period of time. What about daily expenses?"
"Your Majesty, we have calculated it. If everything goes well, the court's income will increase greatly by the year after next. So, it's nothing more than two years of austerity. If it doesn't work out, we can just borrow money."
Alas, it's a pity that the Ming Dynasty has not yet issued paper money. Otherwise, why would it be so troublesome? Wouldn't it be enough to print more money? In this way, the government will not have to go into debt, and the currency depreciation will further promote consumption.
Well, after these five years are over, before launching a massive counterattack against India, I must first deal with the paper currency issue!
