Chapter 36 – Privatization (2/2)

Translator: TeamTWO

Editor: Levs

As for everyone’s doubts, Ouyang Shuo didn’t care to explain.

“I have decided to set up a Financial Division to be responsible for the financial affairs and taxation of the territory after privatization. The Financial Division will operate independently, and the Four Seas Bank will also be incorporated into the Financial Division’s jurisdiction. The Financial Division Secretary will also be Cui Yingyu.”

Everyone suddenly realized what was going on. The Financial Secretary and the manager of the Four Seas Bank, that was the real God of Wealth. The status of that position was comparable to that of the Director of Administration.

Yingyu was also incomparably excited, recalling her talk with Ouyang Shuo yesterday vividly. She did not expect that with this one move, he would not only unload her of the burden of the Material Reserves Division, he would then promptly make her responsible for the even more important Financial Division. She slowly rose and said crisply, “I will not fail to live up to big brother’s trust!”

Ouyang Shuo nodded at her. “With the Financial Division established, your first task is to establish an effective tax system. Here, I will set the general tone for everyone to discuss the specific details of implementation, and for the loans from the Four Seas Bank. The Financial Divison will be responsible for making the report.”

Yingyu nodded, showing that she understood.

“In simple terms, the tax will be divided into two types, agricultural taxes, and business taxes. The agricultural tax will be relatively simple, it should be set at 3.3%.

The business taxes will be divided into customs duty and business tax. For tariffs, we have to expand the territory and have business contacts with the outside world, only then can we set up checkpoints for tariffs. Hence, at this stage, we will be focusing more on business tax. In order to encourage handicrafts and commerce, we will also set the business tax at 3.3%.

“Tax will be an important financial source of the territory in the future, we must maintain the stability of the tax rate to foster growth. If you have any comments, you can speak freely.”

Fan Zhongyan stood up and said quietly, “The lord is generous and loves his people, this tax rate is already the lowest in history. My only fear is that such a low tax rate cannot maintain our daily expenses and military spending.”

“The two low-level tax rates are more conducive to the rapid development of the territory’s economy. As long as we make the cake bigger, even if we only have a small share, that share can still be very impressive. On the other hand, if the cake is small, even if we take half the cake, it is still not much.

“Most importantly, in the territory, there are industries that were not privatized, a source of income whose profits will all be turned over to the Financial Secretary, so that the government will not have to worry about the financial affairs of the territory,” Ouyang Shuo replied to him.

Hearing Ouyang Shuo says that the salt and other industries’ profits would be turned in to the Financial Secretary, Fan Zhongyan calmed down. As someone that worries about the country, his wish for the low-level tax had been met just as he wanted. He was actually worried that Ouyang Shuo would claim ownership over the industries, but Ouyang Shuo said he would not hold onto certain industries. Otherwise, if the territory was short on money, then, in the end, they could only grab it from the hands of the common people.

This was one of the limitations of historical figures. Even with the wisdom of Fan Zhongyan, he did not understand that the strength of a territory was the strength of a player. Ouyang Shuo, as a player lord, simply didn’t care if he didn’t have his own massive treasury.

After Fan Zhongyan was done, Zhao Dexian rose. “Lord, I have a question. For farmers, do we need to pay the agricultural tax at the same time as paying rent on the farmland?”

“The Secretary of Agriculture will be dividing the farmland among the farmers, and providing free property to be worked by them in the form of farmland rights that they own themselves to ensure their own interests. They are not, however, allowed to annex new lands. We will not allow new farmlands to be cultivated privately, only the Land Reclamation Division may do this,” Ouyang Shuo explained briefly. “As for the number of mu of farmland that each farmer can get, it is necessary for the department to discuss among themselves.”

Zhao Dexian nodded his head, understanding clearly.

Hearing Ouyang Shuo finish with the arrangements for the farmers, the temporary Secretary Zhao Youfang stood up. “Lord, we also want to know, how will we collect the taxes from hunters and fishermen?”

“First of all, the fishermen. There are two ways to tax the fishermen. One is to tax the sale of the fish directly on the market. In order to ensure that the tax is smooth and there is no evasion, the fish must be sold at a fixed stall, not privately. The other method is that they can sell it directly to the Material Reserves Division, they will be charged based on the business tax. However, sporadic tradings will not be taxed.”

“The taxation of herdsmen works similarly to that of fishermen. The buffalo will be a restricted animal and cannot be slaughtered for sale. It can only be sold to the Material Reserves Division, and the ranch controlled directly by the territory is not taxable.”

Ouyang Shuo knew that with such provisions there were still loopholes, and some tax evasion tricks were not blocked. For example, a cunning shepherd might think of keeping his livestock in the territorial ranch, thus avoiding the taxes. But right now, the Financial Secretary was new and the staff was undertrained. It was not advisable to carry out too complex of an operation, otherwise, it would be self-defeating.

Waiting until Zhao Youfang was done, Mu Qingsi stood up and said happily, “Little Sister has a question to ask. If I had acquired the tailor workshop, then will the terms of one set of clothes per person in the territory basic welfare package continue on? If it will continue, who do I go to for compensation?”

“There are two options for compensation this way. One- the territory will provide you raw materials for the cloth, the tailor shop will only be responsible for processing them. For producing clothing, the territory will pay you for your work.

“You can also, of course, buy your own cloth, make your own clothing, and the territory will buy the clothes from you at market price.”

“This kind of market-oriented cooperation applies to all types of privatization after the shops open. Of course, after the privatization, certain military goods like arrows and leather armor cannot be arbitrarily made, only the government weapons workshop can produce such military goods..”

The discussion about taxation lasted nearly an hour and a half. During this period, representatives of the various industries all spoke up about problems in their own areas. Ouyang Shuo answered all of their questions.

Yingyu was sitting there feeling the mountain-like pressure. Writing all these questions and answers down, she did not have time to think about them, nor know how to answer them. She could only diligently write down Ouyang Shuo’s answers one by one. After she had some time, she could sort out the answers and write them down into the guidelines for the Financial Division, she didn’t know what else to do.

With the taxation and bank problem done, the remaining items would be much easier. Ouyang Shuo said a bit lazily, “On the development of wage levels and price levels, I leave the Administration Department with full responsibility of a detailed program, present to me for approval. As for all kinds of shops and basic welfare distribution and implementation, naturally, the Material Reserves and Construction Divisions will take full responsibility.”

To these orders, Fan Zhongyan, Zhao Youfang, and Zhao Dewang nodded, showing they understood the orders.

“We will also discuss the pricing of shops and real estate,” Ouyang Shuo went on. “According to how things develop, there will be a number of large-scale adjustments to our plans in the foreseeable future, which will involve a large amount of land, including the demolition of existing shops. Therefore, before we do pricing, we need to have rigid requirements for the real estate property rights. That is, villagers will be buying real estate rights and income rights. The land itself still belongs to the government.”

“If the land is needed, the owner of the property rights must unconditionally obey the territory’s decision and accept the removal of the territory or shop. As compensation, the territory will unconditionally replace the same real estate with the same sized building in the new location.

“Therefore, at this stage, we will need to assess the real estate and shop prices, you must not consider the cost of land use. For a basic tailor shop, for example, it takes 40 units of wood, 20 units of stone, coupled with the labor needed to make it. The cost is the sum of ALL the construction costs. On the market, a unit of wood is 20 copper coins, a unit of stone 30 copper. Therefore, the cost of a basic tailor shop’s materials is 1400 copper pieces, with labor costs being set by the Construction Division.

“My opinion is that real estate prices are generally about 1.5 times the construction costs of the property and 2 times for business shops. As for renting a building, use the 1:200 ratio rent to price, that is, the monthly rent should be 0.5% of the price of the building.

Once Ouyang Shuo finished, Little Sister Mu on the side whispered, “Big Brother, bloodsucker! You are doubling the price for the people?”

Shuo looked at her as he explained, “All of you may be wondering, why not act in accordance with the cost of construction? One, we have to respect the laws of the market. If you do not grab a certain profit, it is easy to disrupt the market. Two- supply has to remain balanced with construction costs, otherwise the price could be too low and the number of buyers too high.

“For example, up to twenty people can live in a small residential courtyard. If the price is too low, a family of three might have the ability to buy one. Suddenly, there will be housing tension in the territory. With privatization, the living conditions of the villagers will improve greatly. Therefore, the construction division will have to adapt to the laws of the market, with the flexibility to adjust the size and number of small courtyard residences, with other buildings more suitable for people to live in.”

Zhao Dewang rose and said, “Understood!”

“Residential and retail pricing and the follow-up sales and proceeds are the responsibility of the Administration Department, to be marked as financial revenue and deposited into Four Seas Bank.”

At this point, the discussion on the privatization of the territory came to an end. There are a lot of specific works waiting for the divisions to handle and most of them could not be done overnight.