Chapter 1778 - Aftermath and Taxation
Liang Xinhu had been an obscure, ordinary Senator before coming to Guangzhou. Aside from the General Affairs Section staff who handled Senators' daily needs and security, almost no naturalized citizens knew him. For years, he had been responsible for the Circuit Court, traveling systematically across Hainan, holding court in county towns or market towns.
The cases varied in size, from civil disputes over children peeing on firewood stacks to criminal cases of robbery and murder. The plots weren't overly complex, and for a law graduate like him, they weren't hard to handle.
However, now that he was in Guangzhou, the complexity of cases grew geometrically. The Ministry of Justice and Liu Xiang shared the same requirement: propagate the Senatorial Council's "spirit of rule of law" through case trials, especially civil and commercial law.
"Ancient Chinese law is very backward in civil and commercial aspects," Liu Xiang said. "That's why we have so many myths about merchant 'integrity' alongside sayings like 'no merchant is not treacherous.' From our social practice, merchants in this timeline are a complex group—neither too good nor too bad. But overall, they 'follow rules' and have a certain 'legal consciousness'; they are the group in society with the strongest concept of law. But given the government's years of suppression and plunder, its indifference to merchant interests, and the treacherous social environment, this so-called concept of law must be taken with a grain of salt."
"So we need to educate them legally..."
"Exactly." Liu Xiang nodded. "Cleaning up the brokerages—it's a medium-sized task. But it fits perfectly for advertising our spirit of ruling by law and showing off our precise, effective governance techniques—things the traditional feudal government of the past couldn't do."
"Good."
"But I have worries. First, the brokerages have too many bad debts; I fear confiscating their homes won't cover the deficits. Second, itinerant merchants might seize the chance for revenge or profit by fabricating facts—brokers aren't good people, but merchants aren't saints either. We can't give the citizens the impression that we're punishing just for the sake of punishing."
"I agree completely," Liang Xinhu said. "Actually, it's not hard. I intend to implement three principles in the cleanup: First, whoever claims must prove. Those claiming brokers owe payment or need to return goods must provide sufficient evidence; no evidence, no count. Second, the statute of limitations is two years, calculated from our entry into the city. Anything older is ignored, to avoid entanglement in ancient history. Third, insist this is civil and commercial economic behavior; no 'Blue Sky Magistrate' style debt-recovery or redressing of grievances. Actual criminal cases will be transferred to the police. The Aftermath Office won't handle them."
"Very good." Liu Xiang nodded. "But what if the assets don't cover the debts after cleanup?"
His words implied another layer: If the deficit is too big, we won't get anything out of it ourselves.
Guangzhou's fiscal expenditure was counting on this windfall from confiscations.
But this fortune had to be made subtly. The masses had to be satisfied; they couldn't just lie with their eyes open—that would look too ugly.
Liang Xinhu naturally understood. He laughed, "Come on, you're conducting a civil service interview. Since that's the case, I'll be more detailed."
The specific measures were: stick to "one case per household," no pooled accounts. Zhang San's debts are paid with Zhang San's assets; don't touch Li Si's assets. For those with severe deficits and insolvency, use proportional repayment. Finally, adopt a system of unlimited liability recovery.
"...The Ming has no concept of limited liability, so using unlimited liability recovery fits customary law. And from judicial practice, merchants in this timeline mostly don't separate family and business. Distinguishing family assets from enterprise assets is nearly impossible. Besides, they keep little cash; most assets are converted into private real estate like land and houses. Limited liability would let them off too easy. Although limited liability companies are the future trend, we can't do it now, nor is it necessary."
Liang Xinhu finished, then added, "I've been looking at the situation these days and feel our legal propaganda isn't enough."
The greatest fear of the Guangdong natives—especially the gentry and merchants—was their total ignorance of the Senatorial Council's laws and modus operandi. They didn't know what the Council wanted or why it did things.
Even if they knew the Australians valued trust and law, the manner of doing so baffled them. They didn't know if they would violate taboos, leading to easy misunderstandings. If the police arrested someone from a certain faction during duty, simply because that person broke the law and not targeting the faction, group, or ethnicity, the locals—lacking the concept of equality before the law or understanding why trivial matters (in Ming terms) were punished—would imagine: "Is the Council making an example of me?" or "Did I inadvertently offend a Senator?" Eventually, this could evolve into flight or resistance.
"A few days ago we abolished the brokerages and arrested the ringleaders of the attack on the Haiyang Guild Hall. Director Lin and Chief Mu told me: the Teochew-Swatow merchants in the city are arrogant now. In transactions with Cantonese and Hakka merchants, they're bullying others. Clearly, they misunderstood, thinking we're playing the old game of supporting one faction to hit another. My view is: to explain the Council's laws to the natives, the best way is to print a batch of pamphlets similar to the 'Basic Law,' distributing them cheaply or for free. Use simple words to explain the Council's most basic laws—rights, freedoms, welfare of a citizen; what is forbidden (insulting others, enslaving others, illegal imprisonment). Also, the concept and function of police, enforcement methods, how the Council operates as a polity. This way natives can roughly understand the difference between the Council and the Ming, and our methods. Even if they don't understand the law itself, they'll know what to expect. This plays a major role in stabilizing hearts and implementing national policy."
"You make a lot of sense. I remember we compiled similar pamphlets in Hainan..."
"Our Law Club compiled them. But they were too simple. Guangzhou is a big city with complex conditions. I think they should be revised and supplemented. If you agree, I'll start on this in a few days."
"Good. Once you've compiled it, I'll arrange for mass printing and distribution."
Liu Xiang discussed some specific details with Liang Xinhu before adjourning. Then, without stopping, he held a small meeting with Lin Baiguang, Zheng Shangjie, and others to discuss holding the First Plenary Representative Assembly of the Guangzhou Federation of Industry and Commerce.
Liu Xiang was in a hurry to hold the meeting not only to ascertain Guangzhou's economic baseline but also to collect taxes.
They hadn't been in the city long, and everything needed doing. Administrative costs and personnel expenses were climbing. Currently, the municipal government was supported by "startup funds" and "fiscal returns." As projects unfolded and local public servants were recruited, solving the fiscal burden quickly became Liu Xiang's top priority.
"Making a fortune from confiscations" by striking at old forces in the city was a temporary measure, not sustainable.
But taxation was a systematic project. Modern society's efficient tax-extraction mechanism relied on a modern social management system and ample statistical data. Some commented that modern statistics originated precisely from the government's thirst for revenue.
But now, what the Ming left them was fuzzy, chaotic data. Statistical items were unscientific, and the data contained many errors; Liu Xiang dared not use it as a tax basis.
As for Guangzhou's existing tax system, it was mainly agricultural tax. For a commercial city, commercial tax should have been the heavyweight revenue source, but tax types, rates, and collection methods were all backward. Burdens were uneven. Overall, government management of commercial tax was poor; tax types were chaotic, rates arbitrary. Ruthless collection caused public resentment and stifled trade. Individuals got rich, but the public coffers got little. The only source of large reliable income was maritime customs duties.
Now, to scrape up local revenue quickly, Liu Xiang had to restore taxation. Business registration was step one. Through issuing licenses, they now roughly knew how many businesses were in Guangzhou. Based on registered industries, items, personnel, and shop size, they had a preliminary grasp of the scale of industry and commerce.
But this wasn't enough to build a modern tax system. These were just raw data, unsummarized and unorganized. Besides, these businesses lacked accounting systems meeting modern standards. Considering the Senatorial Council's own hardware level and personnel quality, a truly modern collection mode was impossible. So Liu Xiang discussed with Chen Ce from the Finance and Tax Department and decided to walk on two legs.
One leg was to reorganize import and export duties, which had relatively clear items, introducing the Council's tax system. Customs duties were the bulk of Guangzhou's commercial tax; reorganizing them promised great returns without costing too much manpower or time.
The other leg was utilizing the existing guild system. Almost every sizable trade in Guangzhou had a "public office"—effectively a guild. Assign tax quotas through the guilds. Collection and management would be simpler, especially not requiring masses of tax personnel. Though it had significant side effects, under current circumstances, it was a method to collect taxes quickly.
"Actually, there are many small tax sources we can tap. Like deed tax, stamp duty, and so on."
(End of Chapter)