Chapter 1972 - Money Distribution Plan

The Finance and Tax Bureau trio hadn't come to this meeting empty-handed. They'd spent months hashing out proposals to balance central and local interests regarding tax revenue—discussions that had begun back in Lingao, with internal debates at the Ministry of Finance and private consultations between Cheng Dong and various Senate heavyweights.

The difficulty lay in scope and depth. Fiscal reform touched everything: political structure, governmental organization, departmental checks and balances. It was a minefield of competing interests, which explained why no one had issued a definitive policy statement. Before departing for Guangzhou, Cheng Dong had given explicit instructions: this was an opportunity to experiment outside the traditional Lingao-Hainan heartland. They had to seize it. Use Guangzhou as a pilot program to roll out comprehensive fiscal system reform across the entire Australian Song regime.

But reality proved frustrating. The Guangzhou transmigrators—Liu Xiang included—wailed about poverty louder than anyone, yet whenever Ai Zhixin approached with reform proposals to solicit feedback, they'd laugh it off. Vague deflections. Claims of incomprehension. Not that they truly couldn't understand—they simply feared falling into the Finance Province's "trap" and finding themselves in a financially disadvantageous position down the line.

So Ai Zhixin had decided to force their hand. Give them a taste of fiscal starvation. Create urgency. Make them realize that without facing reality and implementing reforms, they'd have no money to spend at all. Force everyone to the negotiating table in good faith.

"We have two proposals," Wang Qiyi announced, attempting to lighten the heavy atmosphere. "A gentle approach and a radical one. Which would you like to hear first?"

"The radical one!"

"Let your wife present it!"

"Yeah, I'd rather not listen to this greasy middle-aged man drone on."

The Wang couple had good-natured reputations, so everyone felt comfortable ribbing them.

"Alright, I'll present the radical option first." Zhang Xiaoqi shot her husband an appreciative glance—he really did understand these uncouth colleagues. "The Finance and Tax Bureau would split the tax department into a National Taxation Bureau and a Local Taxation Bureau."

"National and local separation? Where's the creativity in that?"

"You're just creating redundant bureaucracy. How many more civil servants will we have to recruit?"

"Let me finish." Zhang Xiaoqi raised her voice over the grumbling. "Currently, Guangzhou's primary concern is lack of funds. But beyond that, there's the question of ownership—what belongs to the locality versus what belongs to the center, and how to divide it. Mayor Liu, do you really claim you have no selfish interest in this matter?"

"Of course not. Even if I want a larger share, it's for developing and building Guangzhou."

"Exactly. Tax revenue is collected from Guangzhou, after all. As the person governing this city, naturally you'd prefer those tax funds stay in Guangzhou—taken from the people, used for the people. Fair enough. Everyone can understand that impulse. But consider this: if all tax funds go to the Center, and you have to submit a written request every single time you need an allocation, would you still be so enthusiastic about tax collection? Would everyone in this room still treat our Finance and Tax Bureau with such solicitude?" Zhang Xiaoqi paused for effect. "Probably not. Would you seek alternative channels for discretionary funding? Definitely. Now, I don't think this stems from selfishness. If I were a local official, I'd do the same. It's simple: your position determines your perspective."

Liu Xiang gave a slight nod. He'd served as a local administrator early in his career. As Qiongshan County Director, he'd run the Lingao-Qiongshan circuit countless times over revenue issues, consuming enormous amounts of time and energy. He'd managed to create a "Model County," yes, but he'd long harbored deep dissatisfaction with the lack of local fiscal autonomy. Back then, Qiongshan's fiscal revenue came primarily from agricultural taxes—grain—and construction relied almost entirely on central subsidies for everything from funding to materials, so his grievances had been muted. Now, in Guangzhou, suddenly "striking it rich," his mentality had fundamentally shifted.

"Let me tell you a story," Zhang Xiaoqi continued. "Do you know why China separated national and local tax bureaus in 1994? Not because local governments had no money—because the Center had no money. Before the separation, the government maintained only one unified tax institution from top to bottom. On the eve of separation in 1993, central government finances were in dire straits. The data shows that central fiscal revenue as a proportion of total national revenue had plummeted from 40.5% in 1984 to just 22% by 1993. Central revenue and expenditure had to rely on local government remittances just to balance the books. Did this mean provincial and municipal governments were ignoring or defying the Center? Of course not. It was systemic."

She let that sink in before continuing. "The solution—adopting the national-local bureau separation and establishing Local Taxation Bureaus—was actually the Center ceding part of its tax revenue to local governments. Formalizing income streams within the official tax system while providing localities with sufficient financial resources to prevent the emergence of gray fiscal income. We're absorbing that lesson from the old timeline, making a clear division of collection responsibilities. No centralized remittance schemes. Of course, this approach has disadvantages. Institutional bloat and personnel redundancy, for one. We don't have enough hands as it is. Even when we do achieve full staffing, taxpayers will face duplicated compliance costs. Additionally, the tax categories left to you, Grand Magistrate Liu—meaning the Local Taxation Bureau's jurisdiction—would likely mirror the old timeline: difficult to collect, low tax rates, small total yields. The easy-to-collect, easy-to-manage categories would definitely fall under the National Tax Bureau."

"So you're openly bullying the localities?"

"How else did central revenue increase in the old timeline? To prevent you from turning all tax revenue into gray income, they throw you scraps while eating the meat. That's the arrangement, because decision-making power rests with the Center, not the localities."

"Then how do you think the Center would divide it?" Liu Xiang's tone was steely. He was determined to get a straight answer.

"First, stamp duty—easiest to collect—definitely goes to the Center. Same as the old timeline. Property tax, easily assessed, low accounting costs, stable yields—also Central. Then there's circulation tax. That's the big one, but it's harder to manage with high collection costs, so it would likely go to the Local Taxation Bureau. However—" Zhang Xiaoqi held up a finger. "Circulation tax has an enormous tax base, so the Center would almost certainly demand direct revenue sharing."

"That's highway robbery! We do all the work and still have to share with the Center? We'd be working for free!"

"Hehe. That's exactly how it was done in the old timeline." Wang Qiyi smiled.

"Then tell us about the other plan." Liu Xiang didn't join the chorus of complaints. His face had darkened. He sensed something was off but couldn't quite articulate what.

"The second plan is this." Zhang Xiaoqi had been waiting for Liu Xiang's prompt. In truth, they were primarily advocating for the second proposal, but if they didn't offer two options, it would feel like Liu Xiang and the other transmigrators were being railroaded. The first plan had been deliberately sketched hastily, with heavy emphasis on its drawbacks.

"Tax sharing with tiered budgeting. Simply put, tax revenue is split according to proportions negotiated between the Center and the locality. This is called budget stratification. After the National Treasury receives tax funds, it directly transfers the local share to the locality. As for the sharing ratio, that depends on negotiations between Center and locality. The ratio can be adjusted as needed—it's not complicated. The advantages of this approach include rapid fund disbursement, guaranteed local tax revenue streams, streamlined institutions, improved personnel quality, easier management, reduced collection and compliance costs, clear tax assignments, and so forth. Shanghai in the old timeline never implemented the separation and performed quite well under this model. The downside? The sharing ratio depends entirely on how hard you all fight for it in the Senate."

"So it's still the Center having final say..." Liu Xiang's voice carried an edge of resentment.

"Haha, Grand Magistrate Liu, what exactly are you struggling with?" Wang Qiyi leaned forward. "'Center' this, 'Center' that—have you forgotten your own identity? You're a Senator. A Senator of the Senate. You yourself are the Center, just temporarily dispatched outward. Everyone sitting in this room—who isn't part of the Center? Do you plan to settle in Guangzhou for life? Let me be blunt: these provincial-level leadership positions will sooner or later transfer to naturalized citizen cadres. In the future, you will be the 'Center' they're talking about."

Wang Qiyi felt that the people in this room had spent too long in Guangzhou. They'd unconsciously begun identifying themselves psychologically as "Guangzhou Municipal So-and-So Director," forgetting their fundamental identity.

Still, it was understandable. Political achievement required an economic foundation.

"To put it another way—Mu Min, you're the Guangzhou Police Chief, but you're not only the Guangzhou Police Chief. And Fatty Cui, you're the Abbot of all New Taoism, not just the Abbot of this Five Immortals Temple in Guangzhou."

"Mm. Fair point." Liu Xiang suddenly grasped the perspective shift. He'd poured so much effort into Guangzhou that he'd genuinely begun treating himself as nothing more than the Mayor of Guangzhou. But he would eventually return to the Center. It wasn't promotion—it was repatriation.

"So what about right now?" Liu Xiang pressed. "You still need to give me money to get things done. Even if I eventually return to the Center, I want to deliver results in Guangzhou before I leave."

"That can be negotiated. Let me give you an example: property tax. This revenue stream is generated by Guangzhou locals and has minimal relation to external factors. We can absolutely demand a high local sharing percentage. Frankly, just like in the old timeline, for tax categories closely tied to local economic conditions, you can demand significantly higher shares. Whoever develops their area well benefits more—that logic holds anywhere."

"Everyone." Ai Zhixin saw his opening as the room fell into contemplative silence. Time to close the deal before anyone could tie themselves in knots again. "Our entire Finance Department has held multiple internal discussions. Most agree the second plan suits our current reality extremely well. We're in the founding stage—everything must be streamlined. Adopting a tax-sharing system guarantees local financial resources while ensuring central revenue. Right now, every region is engaged in construction. We will absolutely support localities through the sharing mechanism. But setting aside revenue sharing for a moment—isn't there already substantial direct investment from the Center and central departments in local construction? Take the medical system: the Guangdong General Hospital in Guangzhou was built by the Construction General Company. Medical staff are directly transferred after training by Ministry of Health units and schools. Equipment is allocated by the Lingao Pharmaceutical and Medical Device Factory. And so on. Isn't that another form of transfer payment beyond fiscal appropriations and revenue sharing?"

Silence.

"I prefer the second plan," Liu Xiang finally said after absorbing Ai Zhixin's closing argument. "How about we vote?"

"Don't rush." Ai Zhixin raised a hand. "This isn't a small matter. I think everyone should go back and consider it carefully. I've prepared copies of the draft proposal—everyone take one."

For a pilot initiative of this magnitude, caution was paramount. Better to pursue maximum consensus before pushing forward.

(End of Chapter)