Chapter 190: Local Finance

Chen Ce reflected that Qiongshan’s industry and commerce were the most developed in Hainan for this era, and it had all grown naturally. This was fundamentally different from Lingao, where commerce had only flourished with the support of the Australians.

“He’s only been a county magistrate for a few days, and already his tail of localism is showing,” Chen Ce thought to himself. It seemed there would be plenty of disputes over tax issues in the future. Currently, Lingao did not have a specific tax-sharing system, so how to distribute the collected taxes would likely be another troublesome matter.

Although Chen Ce was based at the Delong Bank’s head office, busy planning the establishment of branches and primary tax agencies in various locations, the contradictions within the financial system were gradually surfacing with the end of the Spring Awakening campaign and the pacification war.

As county-level governments were established one after another, local finance and taxation became an unavoidable topic.

Although Lingao County had Xiong Buyou as its most senior county office director, Lingao County had not established any separate administrative body. All construction and investment were directly handled by the Executive Committee, having nothing to do with local finance and taxation.

Sanya Special Administrative Region couldn’t be considered a local government either; it was merely an dispatched agency. Since the area originally had no population, industry, commerce, or agriculture, Sanya was a colony built entirely by the Senate. The vast majority of its output—minerals, agricultural and forestry products, and fishery products—was all transported to Lingao. Meanwhile, the materials needed locally, from clothing, grain, and tools to fuel, were all shipped from Lingao. All investment came from Lingao’s appropriations, and its operation also depended on materials and cash allocated from Lingao. The Sanya Special Administrative Region was completely dependent on the parent body in Lingao, making it a thorough economic vassal.

However, the various prefectures and counties they now controlled, despite their different economic conditions, were each independent economic entities. They had a city, several villages, and a varying population. They had farmland and some industry and commerce of different scales. The old model of Lingao, which was also the Senate’s model, could no longer be applied. Each county now had an Elder as its magistrate and a set of administrative staff.

With an administrative body came the issue of local finance. The fiscal policy of the Ming Dynasty in the era of Zhu Yuanzhang was basically for the central government to take everything, leaving almost nothing for the localities. From the perspective of centralization, this was indeed effective, but it was a disaster for local administration. Because the counties lacked sufficient financial resources, the county magistrate could do almost nothing. It was even difficult to maintain basic administration. Naturally, without some clever thinking to acquire off-the-books funds, it was impossible to continue as an official.

The Elders all understood the drawbacks of this system. But how to improve it involved a major undertaking, touching not only on the tax system and financial system but also on the important issue of power distribution between the central and local governments. The Executive Committee had recently been holding expanded meetings on this issue, often discussing it late into the night before adjourning.

Before a definite plan was formulated, a system of full budget allocation for administrative expenses was temporarily in use. When each county office director took office, the General Directorate of Finance would issue a one-time payment of circulation coupons. Currently, these coupons were still backed by grain. Based on the allocated amount, the Planning Commission would allocate an equivalent amount of grain as reserves. Of course, the grain itself did not need to be transported long distances. After the pacification war, the Planning Commission controlled a considerable amount of grain in each county, mainly from the former county granaries and grain confiscated or seized during the pacification war and land survey. Apart from a portion transported to Lingao, the rest remained in the granaries of each county, requiring only a simple accounting transfer.

The funds issued to each county did not go directly into the hands of the county office director but were deposited into a special financial account at the local Delong branch, to be disbursed by the director. Because local administrative expenses were numerous and complex, the General Directorate of Finance created a list of regular recurring expenses. This provided a rough idea of the monthly allocation needed. This expenditure was for designated purposes only, and the county office director could not use it under other pretexts. This prevented the embarrassing situation of a leader overspending on a whim and being unable to pay salaries at the end of the month.

Creating a table of regular expenses was not easy. No one knew how much administrative expenditure a 17th-century county required each month. And Lingao’s financial expenditures offered no reference value, as it had always been a consolidated account. Especially on the expenses for financially supported personnel, how the agencies in each county should be arranged, how many personnel to set, what their ranks and salaries should be… none of this had been fully decided yet. Therefore, management could only be relatively rough. Cheng Dong demanded that the temporarily set quotas should be tight rather than loose, to avoid creating a precedent that would be difficult to rein in later.

Other expenses beyond the regular ones were temporarily at the discretion of the county office director within the monthly total, which could have a surplus but could not be overspent.

As for the income of each county, including taxes, fines, confiscations, etc., it was all to be submitted to the Planning Commission and the General Directorate of Finance.

This centralized collection and expenditure fiscal policy was certainly improper, especially as it completely erased the financial autonomy of the counties. In essence, it was not much different from the Ming dynasty’s local finance system—in fact, it was even more tightly controlled. But for now, it was the only way. The Executive Committee’s requirement for local governments was “stability.” While maintaining local public order, the resources from various places were to be collected first to supply the operation of the Senate. As for economic construction, it was not the primary job of the county office directors.

This system had been officially implemented since the end of last year and had been in place for over a year now. Each county on Hainan Island had roughly established a financial system according to these regulations, and it was running normally.

However, for Chen Ce, during his official financial tour around Hainan Island, he had already sensed some pushback. The county office directors, especially those from counties with a relatively high level of agriculture and better economic conditions in the past—counties like Qiongshan, Chengmai, Wenchang, and Ding’an—were quite dissatisfied with the centralized fiscal system and strongly hoped for reform.

Chen Ce understood their thoughts to some extent. Becoming a county office director was like becoming a local lord. Most of them had a certain degree of ambition. Even if they ruled a poor, small county with only tens of thousands of people, they still wanted to make a name for themselves. The enduring popularity of simulation games explained the mentality of most people. Moreover, the counties of Hainan Island were rich in resources, with too many projects that could be developed and constructed. Chen Ce had been to Changhua Fort—a small fortress garrisoned by only a dozen people. Although it was surrounded by barren sandy beaches with no resources to speak of, they had achieved great success just by raising goats on the sandy land before the Spring Awakening campaign. In the autumn of 1630, Changhua Fort supplied three hundred goats to Lingao.

To invest and build, relying solely on the direct investment of the Planning Commission was not feasible. The Planning Commission had too many projects to invest in. With the limited manpower and resources of the Lingao regime, they could barely manage the “central enterprises,” let alone local industries. Moreover, the severe labor shortage also made the Planning Commission uninterested in local industry.

Chen Ce knew that Liu Xiang was dissatisfied with the Executive Committee’s action of taking away a large number of laborers from Qiongshan after the typhoon last month. On Hainan Island, you needed people to do anything. Although Liu Xiang ultimately worked hard to complete the task, the conflict between the central and local authorities was already beginning to show.

Hopefully, the conflict will ease after the people from Shandong arrive, Chen Ce thought. As long as there is a population, with the Elders’ abilities, it shouldn’t be difficult for them to each use their own skills to develop some local industries. Of course, the financial system would also need to be reformed.

Chen Ce smiled and said, “When the refugees from Shandong arrive, it will be easier for you to raise your fish. Wasn’t Lingao’s prosperity also built on bringing in a large population from Guangdong?”

“We’ll have to wait until at least the end of the year for the Shandong refugees, right?” Liu Xiang, unaware of Chen Ce’s thoughts, said enthusiastically, “I have some ideas right now that don’t require much investment, just people to do the work.” He then told him about his and Tang Menglong’s idea of using the coal from the Jiazi Coal Mine to start some small industries.

Chen Ce laughed noncommittally and did not answer directly, steering the conversation back to the collection of the summer tax.

The announcement of the summer tax collection in Qiongshan County caused a huge uproar as soon as it was posted. Since this was the first year the Australians were in charge of collecting taxes, everyone, whether rich or poor, commoner or scholar, paid close attention.

According to the discussions in Qiongshan’s teahouses and the idle chatter under the trees, most people believed that the Australians would, in all likelihood, “follow the old rules” and continue to collect taxes according to the Ming dynasty’s methods. For hundreds of years, the imperial grain tax had been collected this way. Furthermore, when the Australians collected the grain tax in Lingao last year, they still followed the old Ming system, merely improving the collection methods and surveying the land, making it much fairer than before. Everyone thought that since the land had also been surveyed in Qiongshan, they would naturally follow the Lingao method. For the powerless common folk, being able to pay taxes according to the rules without any mysterious extra burdens was the greatest of blessings.

However, when the announcement for the summer tax collection was made, everyone was shocked. The “merging of the poll tax into the land tax” alone was sensational enough, and the strange progressive system caused an even greater uproar.

For a time, the streets and alleys, the fronts and backs of houses, and the halls and courtyards were filled with whispered discussions. The common people, although most were illiterate, had someone read the notice to them and listened to the on-site explanations from the propaganda teams. Smiles appeared on their faces, though some looked on in disbelief.

“Does this mean we don’t have to pay taxes anymore?” a few farmer-like men gathered in front of the notice, discussing among themselves. “My family only has six mu of land. Regardless of whether it’s that ‘standard’ or not, it would fall into the first tier by any calculation.”

“In that case, I don’t qualify either.”

“This is a chance to catch our breath. We were just busy replanting sweet potatoes after the typhoon. If we had to pay taxes now, things would be tight…”