Chapter 13: Financial Reforms: Tax Reforms

The Kingdom of Aucrulethen had a centralised organisational structure. The bureaucracy from the old king's reign was still more or less intact, so there was plenty of surviving administrative data.

Desmend spent three months of his life examining fifty years' worth of administrative records and documents. He went through a hundred years' worth of data with a five-year interval and produced a statistical graph. He compared the fluctuations in the chart with periods of famine, wars, declaration of new laws and Ecumenical Councils. Finally, he came to a conclusion.

"Leaving a bunch of money-loving cheap as fuck dwarves in charge of the kingdom taxes was a stupid idea."

Ahead of time, he called all of the Kingdom's bureaucrats to the hall of GEO. It was sort of like the world trade centre back on earth. A World Trade Center brings together businesses involved in international trade from around the globe, which provides the Kingdom's taxes. Makes sense... Aurarock is a technological city for a medieval-like world.

The bureaucrats had expressions full of anxiety, wondering why the new emperor had summoned them except for the bureaucrats from the Royal capital where they had worked with Desmend before. Nevertheless, they calmly drink coffee with milk, making the new drink more taster than ever before.

Desmend inquired a bureaucrat with an even calmer face.

"Knoxx Anderfall."

"Y-Yes!!"

The novice bureaucrat belonging to the dwarven race felt his heart jumping out of his skin.

Unsurprisingly.

The King of Aucrulethen, said to be Goddess's proxy on the mortal plane, had directly called out to him. The fact that he memorised Knoxx's name also made him incredibly nervous.

"Why would the king ever bother learning the name of a rookie bureaucrat like me!!" Knoxx's mind was in disarray.

"Describe our kingdom's tax system."

"Y-Yes!"

The Aucrulethen tax system consisted of seven main kinds of taxes:

You pay land and Property tax for the land you own, the buildings you own, etc.

Head tax - levied as a fixed sum on every liable individual, without reference to income or resources.

Commercial tax is levied on locally manufactured and imported goods and services and contributes to the country's GDP.

Import tax- a tax collected on imports and some exports by a country's customs authorities

Tariffs: When you enter a city with wares, you have to pay a tax to enter. This allows cities to profit from merchants and will perhaps enable guides to make deals with cities.

War Tax: A tax billed by the military.

Enslaved liberation Tax: A headcount on the number of slaves you own.

In addition, the people in this room held a salt monopoly. Which is something Desmend is going to change sometime later... If the research points head to magical appliances.

"I see. Thank you, Knoxx."

Then Desmend declared as he put a hand to his head. The injury from Eliza is fresh and said person is wearing a very lacy, frilly combat uniform and is smiling ear to ear at her handiwork.

Damn sexy half-dwarf.

"The head tax, the commercial tax, the import tax, the slave emancipation tax and the salt monopoly will be eliminated or revised.." Desmend stated blase.

"Eh?" The bureaucrats' expressions froze. What Desmend said was so blunt they couldn't keep up with him. But one by one, they started to grasp the meaning of his words.

The Chosen One wants to make radical changes in the taxation system!

Changes are scary. Change can worsen the situation. Right now, however, they can still manage; they prefer not to make any changes.

Many of them started having these kinds of thoughts and felt alarmed by these reforms. Yet Desmend didn't have even a shred of anxiety.

Why do you ask?

Desmend had confidence in himself. He firmly believed that anything he did was absolutely correct.

The judge, teachers, and his old crew always said he had ways to make money.

"Y-Your Majesty! That would be…."

"Be quiet for a second! I'm going to explain my genius—your welcome, by the way—you can protest after hearing what I have to say. Though I doubt it would work. Harry, drop the ball."

The giddy knight took out an administrative datasheet and dropped it on the table.

"Knoxx, since I like you so much, take a look at this and tell me what you think. Start with the head tax. Dumb name, by the way." Desmend said while taking a sip of water. He never quite liked coffee. He made so much money from that, the Empire bought tons of loads per month.

"U-Um…"

The novice bureaucrat whom the Chosen One was oddly pleased with conveyed his thoughts.

"T-There are only women and children on this list… I think."

"Exactly! Dude!" Desmend bangs his fist on the table. Since he is the ruler of this place, that means people are cheating him out of money. "Now, why are there only women and children on this list?" he asked the room.

They all shook their heads.

"Because the person that wrote this was a sexist idiot! They're writing down who is liable for the head tax, but they don't actually know what the population looks like! There's no way to know if they're lying about how many people live here or not! This is a recipe for disaster!" Desmend pointed out the flaws in the system.

This was a problem caused by the King's lack of authority over the bureaucracy, which was why he needed to reform the whole thing.

The Kingdom of Aucrulethen's head tax was dumb and infective. And for people with physical disabilities… limb loss or visual or hearing impairments, for example, their tax burden would be even lower. Which wouldn't be a problem, but Desmend KNEW that regular people would lie their asses off saying that they were handicapped, which meant the actual number of people with a disability in the Kingdom might be higher than expected.

In the beginning, even peasants did their tax reports seriously. But at some point, the peasants, serfs and low-income people noticed something.

Nobody would notice even if they lied.

This was the downside of living in medieval-like times. Visual and hearing impairments were self-declared. As a result, officials had no way to confirm but to rely on the person's own words. Also, with a report like "My family had one man and ten disabled people," it was far too time-consuming to enter their house to verify the report's content or to check if someone was disabled or not.

Which meant that the government was getting cheated out of the people's money. The Kingdom had a population of over 10 million people. In the first place, the reported population might be inaccurate. Some people could have counted wrong on purpose, many peasants could have under-reported, and no one would be none the wiser.

With each person evading tax, it gradually developed into a colossal problem…

What do you think would happen when dust builds up?

Of course, it was connected to the decline in tax revenue for the Kingdom.

No matter which world you are in, people still won't ever pay their taxes. Desmend even paid his taxes, and he wanted in over 30 states for fraud!

"Hahaha! See? All the people in this room are working for the government, so they want to get paid for doing nothing. You guys won't even notice the difference between this and the current system!"

"B-But—"

"You're right; I'll consider your opinion carefully. But the head tax has indeed been poorly implemented. This is why we need to change it."

"W-We understand, Your Majesty!" The bureaucrats nodded.

However, it would be difficult to implement. Not to mention, Desmend knew that implementing such a major reform would be a huge pain in the neck.

But he also understood that it was necessary.

He had the power to do it, but he would probably end up losing his life trying to figure out how to solve this mess.

"Hey, Knoxx," Desmend addressed the novice bureaucrat. "How about you investigate how many people in this country are paying their taxes honestly? If the number is high, then we don't need to worry about a thing. As long as we have the numbers on the books, we don't need to change anything else. But something tells me it won't be high."

"Y-Yes, Sir!" Knoxx couldn't help but smile. He was shocked. This was the first time the Chosen One had ever asked him a question.

The Chosen One's request was simple enough: He just needed to find the answer to a single question: How many people are lying?

The bureaucrats could say nothing in return. It was clear that the civil registers were full of errors.

After taking a sip of water, the Chosen One turned his eyes towards Knoxx once again. Knoxx stiffened.

"Now, dwarf. How is the commercial tax collected?"

"Well… A merchant's tax rate is calculated from his revenue and the type of commodities…."

"How do you find out his sales revenue?"

"…From his self-assessment, Your Majesty," Knoxx said, slowly seeing the King's point.

"Oh yeah, that's exactly what I'm talking about. There's no way to know if he's telling the truth or not. So basically, there's no way to measure his actual profit."

"I see."

"That's where you come in, Knoxx. Well, your guild, that is. You're an expert in data analysis. Let's see if you can figure out how many people have been reporting false information on their taxes."

Knoxx gulped.

Achieving this task would mean leaving the homeland forever.

The Kingdom of Aucrulethen would not allow its citizens to leave without a good reason.

"Don't worry about your men. They can take shifts on six month period with health care insurance. They should be fine. And the King-- which is me is willing to grant any non-foreign citizenship of the Kingdom of Aucrulethen. Of course, I've been thinking about granting you extended family citizenship from day one."

Knoxx's mouth went dry.

This was the first time Desmend had ever offered him something special.

"Thank you, Your Majesty!"

"Whatever..."

If he had government officials do a surprise inspection, he could probably crackdown on tax evasion to some extent. But that would take far too much work, time and manpower.

Maybe income tax evasion could be minimised if he had a giant bureaucracy on par with Sweden, but that was impossible for the current bureaucracy right now.

"Next is the import tax; this one only obstructs the flow of goods while returning a minuscule income. It also creates an opportunity for crooked officials to line their pockets. Abolished."

The import tax was the most painful tax he had to deal with, but he wasn't going to eliminate it because it was a critical source of revenue for the Kingdom.

Since Desmend, aka him and the princesses of the kingdom, owned a lot of foreign trade companies, he had detailed knowledge of the tariff rates in different countries and territories.

"Okay, let's cut the import tax as well. Go ahead and investigate how much we lose in tax revenue based on the current tariffs."

"Yes, sir!" Knoxx said.

After quickly eliminating the import tax, Desmend got up and circled the bureaucrats at a slow pace. "Next is the slave tax… I shouldn't need to say anything about this one. It's actually singular how this antiquated tax still exists. As you all know, slavery isn't legal in the Aucrulethen, to my regret. Therefore, this tax doesn't exist."

Slave tax was abolished. Desmend actually despises the idea of slavery and will show contempt towards anyone who supports slavery. But for now, it's logically the best way to make money or have an army. And since slaves weren't considered property, there was no need to collect taxes on them. Also, people don't free their slaves anymore either. The Chosen One wished that the slave system would be abolished someday, but he knew that there would be too many problems in that regard.

Then, what are these for?

"These are fees levied on foreigners entering the Aucrulethen Kingdom. Apparently, they're pretty expensive." Desmend pointed at the documents.

When the Chosen One looked at the documents, he saw that there were dozens of different types of fees imposed on immigrants. These fees were intended to cover the costs of having them immigrate into the Kingdom.

It was hard to believe that people could be so greedy.

"I get it. We're charging a fee for immigration into our country. I mean, we already charge a ton of other fees every year, so why not make more money through extortion?" Desmend chuckled.

"We are running a business, after all, Your Majesty," Knoxx shrugged.

"Let's make it a flat rate. The next thing we have to do is abolish the capital tax. Capital tax is levied on the profits made by companies and businesses. From what I've seen, it's ridiculous how high it is."

Capital tax.

This was a tax that the king levied on the profits made by companies.

The capital tax was supposed to be used for the maintenance of public facilities and to improve social welfare.

The Kingdom of Aucrulethen had a lot of wealthy merchants and businessmen. Therefore, they had a lot of resources to invest in the Kingdom.

All the Chosen One had to do was cut the capital tax and let the rich people do with it whatever they wanted.

Desmend didn't really care if the government received less money in taxes. As long as the Kingdom managed to survive, he was okay with it.

"Fine, I'll cut the capital tax, but I want you to explain to me what the Kingdom will use for this money. Just tell me one thing: Do you have enough funds for the social welfare budget or not?"

"Well, yes, Your Majesty. But the social welfare budget is currently too small. That's why we're borrowing from the national treasury."

"Ahh…" The Chosen One sighed and leaned back in his chair. "Why does it have to be like this? When I started this reform, I promised myself that I wouldn't become another ruler who would waste the people's money."

He stared into the distance for a moment and took a deep breath. "Never mind. Okay, let's cut the capital tax and increase the social welfare budget."

"Your Majesty?!"

"This is a radical change, but I'd rather have the people happy than make them suffer. Oh, and let's abolish the corporate tax. I know that this will reduce the amount of taxes we receive, but it's just too complicated. If we look at the big picture, it's not worth the trouble."

The last is the salt monopoly. The state sells salt at a monopoly price of 30 times the regular price. Yet, salt is a necessity, so the people will have to buy it no matter the cost! But, goodness gracious, isn't this just genius…? Seriously, would anyone actually buy the monopolised salt? Rather than the salt monopolised by the state, would people not prefer to buy the much cheaper, higher quality illegal salt circulating in the black market right now?"

The bureaucrats averted their eyes simultaneously. They actually were also purchasing illegal salt themselves. Aucrulethen bureaucrats earned meagre wages; they weren't so well off that they could buy the state-produced salt.

They could see Desmend's point.

"So then, I'm cutting the salt monopoly. I'm going to give the people a choice: Buy the salt that the state owns or buy the salt that the black market offers. The latter will have you will face the repercussions! You'll pay a hefty fine if you get caught buying illegal salt. And if you're dumb enough to get arrested, you'll be kept in prison until you pay the fine. In fact, I'm going to introduce a new law that says you'll get five years in prison if you are found buying illegal salt." Desmend smiled.

"You're joking, right?" Knoxx asked.

"No, I'm deadly serious."

Knoxx was speechless. He couldn't believe what he was hearing.

"But I think this is too harsh, Your Majesty. People aren't being punished for the crime itself; they're just getting fined because of their ignorance. Wouldn't it be better to teach them the difference between right and wrong instead of punishing them? If they understand that they're doing the wrong thing, maybe they would stop."

"Nonsense! It's impossible! Even though I'm asking them to do something immoral or illegal, I'm just trying to educate them. They don't even know what's right or wrong. So I'm afraid that I have no choice but to punish them for their crimes."

The hall was perfectly silent. Not a single person could object to the Chosen One demands.

But then, Knoxx raised his hand and asked a question.

"Will all due respect… Regarding the abolition of import tax, will customs be dissolved as well? I'm afraid abolishing customs would be harmful to national security…."

"Of course not. Rest assured, I have no intention of abolishing customs."

Desmend grinned, and the heavy atmosphere dropped. Looking at Desmend's smile, the bureaucrats' nervousness dissipated somewhat. They began to raise their hands sporadically.

"With all due respect…."

"I-I have a question…."

"I'm a little uncertain about something…."

The Chosen One scrupulously answered the bureaucrats' questions, one by one. Finally, after about an hour, all the bureaucrats had consented to Desmend's assertions.

"Gentlemen. Accordingly, I have devised a new tax plan. Do not hesitate to object. Let us save our Kingdom by implementing a brand new tax system."

Then Harry handed out parchments containing Desmend's new tax plan as he said in conclusion.

By the time the Chosen One reached five months of ruling, the Kingdom of Aucrulethen had evolved considerably.

First of all, the economy was booming.

Thanks to the abolition of the capital tax and the reduction of import taxes, the business climate in the Kingdom improved remarkably. Businessmen were able to make a profit without having to worry about the government seizing their assets.

The Chosen One's new tax policy had also helped the Kingdom's economy grow. In addition, the increased social welfare budget had led to a decrease in unemployment rates and poverty. This was especially true for people living in the countryside.

There were still poor people left behind. However, the Kingdom's new policies were slowly but surely helping the impoverished citizens improve their lives.

As a result, the Kingdom's economic growth rate had doubled since Desmend became king. This was obvious when compared with the previous six months. The Kingdom was growing like a weed, thanks to Desmend's reforms.

Second, the Kingdom's military had been overhauled.

The army had gone through a major restructuring process. It went from a military force whose main purpose was protecting the borders to an army that would protect the nation against external threats.

A huge portion of the old soldiers had retired. Some of them returned to their hometowns to live out their remaining days. Others were killed in battle. All of them were replaced by new recruits.

The Chosen One had also completely transformed the Ministry of Defense and the Ministry of Internal Affairs. New people were put in place, and new laws were introduced. The Chosen One hadn't only reformed the Ministry of Internal Affairs and the Ministry of Defense. He also changed the structure of the various administrative departments within those ministries. He even created new ones.

Desmend had also dismantled the royal guard and formed a new elite unit known as the Royal Guard. Thanks to this, the Kingdom's military power had been greatly enhanced.

Finally, the Chosen One had eliminated the King's Commission.

The King's Commission had been the body responsible for overseeing the Kingdom's internal affairs. Its primary task was the supervision of the bureaucratic infrastructure. It was composed of ministers from other departments and officials from the palace.

Desmend had dissolved the commission and reorganised its members into the Council of Advisors.

The Council of Advisors was made up of eight advisers and the king himself. It consisted of the most influential figures in the Kingdom.

The Council of Advisors was charged with advising the king on everything from foreign policy to domestic issues.

The seven Aucrulethen princesses were heads of the Seven Ministries, even though Desmend has yet to meet the last three princesses.