Chongzhen revived the Ming Dynasty

Zhu Youjian is very cautious about tax outsourcing.

Because if we're not careful, this could easily turn into a tax-farming system.

Therefore, when he had Liu Lishun conduct the trial, he limited it to clearing up outstanding debts and investigating tax evasion. He also set performance targets for the tax authorities, creating competition between them and the debtor companies.

If there are too many outstanding taxes or too much tax evasion, it undoubtedly indicates that the local tax authorities are incompetent and lack sufficient capacity.

Even the chief official would be questioned and deemed incapable of governing.

For officials, that would undoubtedly be a devastating blow, as they would lose the opportunity for promotion.

I believe that most officials, unless they have no hope of promotion, would not outsource all tax collection.

Thinking about this problem, Zhu Youjian added, "I'm taking the insurance."
"A certain percentage of companies and individuals with tax problems should be forced to emigrate to reduce the number of local taxpayers."

"Local officials must understand that debtor companies should not be allowed to get involved unless absolutely necessary."

“Once they get involved, it’s like draining the pond to catch all the fish, reducing the local tax base.”

This regulation will undoubtedly make debt-debt companies even more ruthless. They can bankrupt those who owe taxes and force them to relocate without any scruples.

If local officials turn a blind eye, a large number of taxpayers will be lost, affecting their performance record.

Liu Lishun initially didn't understand why the emperor had made this regulation, but after the emperor mentioned the tax farming system of the former Yuan dynasty, he began to understand—

It turns out that my proposed tax outsourcing could easily turn into a tax-inclusive system.

Thinking of the chaos that ensued after the Yuan Dynasty implemented the tax farming system, Liu Lishun almost broke out in a cold sweat, realizing the serious problem hidden in his suggestion.

He immediately addressed the emperor:
"Your Majesty's concerns are very valid; it is indeed necessary to prevent it from turning into a tax farming system."

"Tax outsourcing should be approached with caution, or perhaps..."

"Perhaps it's unnecessary to implement this!"

He took back his suggestion.

However, Zhu Youjian did not allow it, because the collection of taxes in the Ming Dynasty had always been a major problem.

Even with his continuous efforts to rectify the situation over the years, there has been little improvement.

The taxes that should have been collected were not fully collected.

Although the tax farming system was outdated, it did have some advantages.

For Zhu Youjian, who urgently needed to improve the finances, some measures could be taken.

He said to Liu Lishun:

"Tax outsourcing has many drawbacks, but it is indeed necessary in some aspects."

"For those who frequently default on taxes or evade taxes... if the imperial court can't deal with them, then we have to let private companies take over."

"Even draining the pond to catch all the fish is better than letting them run wild."

"This is not only necessary to increase taxation, but also to maintain order."

"Otherwise, if those who don't pay taxes earn more than those who do, who will bother to pay taxes properly?"

"Making debtor companies clear their debts and investigate tax evasion is to deter these people."

"The imperial court would rather reduce the number of taxpayers than allow this behavior to continue."

Liu Lishun fell silent. When he served as an official in Zhuolu District and Susong New District, he mainly focused on investing in and developing industries. According to the imperial court's policy, he was exempt from taxes for five years.

Therefore, there was a lack of understanding regarding taxation, and only now have we realized the trouble this matter has caused.

Seeing that the emperor was determined not to give up after hearing the proposal to outsource taxation, he could only plead:
“Clearing up arrears and investigating taxes are certainly necessary, but the common people are struggling to make a living. Please, Your Majesty, issue an edict to prohibit them from disturbing the people.”

Zhu Youjian nodded and said to him:

“Ordinary people do need protection; we can’t let debtor companies bother them.”

"But there's no need to issue an imperial decree; you can set the rules yourself during the trial period."

"For example, tax reductions or exemptions for impoverished households can eliminate the need for further investigation."

"The same applies to self-employed individuals; tax reductions or exemptions can be granted to operators with small capital and low profits."

"It can also limit the time for ordinary people to repay their debts. For debts that are more than twenty or thirty years old, the government must intervene and require the debtor company to settle the accounts and waive the debt."

"These specific policies cannot all be decided by my decree."

“You can certainly draft a bill and submit it to the National Assembly while you are piloting the program in Shuntian Prefecture.”

Several suggestions can reduce the disturbance caused by debtor companies.

He can formulate many such policies to protect the rights and interests of ordinary people.

This made Liu Lishun even more aware of just how much power he had in this pilot program.

If his policy proves effective in Shuntian Prefecture, it will be enacted into law and promoted throughout the Ming Dynasty.

Therefore, he was determined to strictly control the debtor companies and prevent them from acting recklessly.

We must ensure that debt-ridden companies become an asset to the government, rather than a tool to control it.
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Regardless of Liu Lishun's thoughts, most officials were overjoyed when news of the establishment of the debt company spread.

The emperor allowed them to invest according to their rank, clearly indicating that he wanted them to openly and legitimately share in the profits.

Court officials were very supportive of the policy and planned to earn extra money from the debt company.

Officials were especially excited after Liu Lishun's proposal to outsource taxation was announced.

Because what is this? It's clearly tax-inclusive.

During the early Yuan Dynasty, local wealthy families made countless profits through this method, and it is still remembered fondly today.

The emperor's decision to delegate taxation power to debt companies undoubtedly excites officials even more:

"This is taxation!"

"What could be more profitable than this?"

Soon, the ministers began to collude with each other to form debt companies.

They used their hometown and community ties to jointly control a region.

Some ministers, lacking sufficient power, planned to send their own people to local areas or transfer local officials to their posts.

The ongoing leadership transition has also been affected, leading to an increase in the rate of communication between officials in the central government and local governments.

This pleased Zhu Youjian greatly, because sending court officials to local areas would undoubtedly strengthen the court's control over those areas.

The fact that local officials travel to Beijing will also make them more inclined to return.

This was the reason he promoted exchanges among officials, but unexpectedly, the establishment of debt corporations strengthened this point.

This can be considered an unexpected bonus, as it brought the connection between the imperial court and local authorities closer together.

However, Zhu Youjian was also wary of the danger of officials forming cliques and interest groups by using debt companies.

To better understand the relationships between officials, Zhu Youjian had Liu Lishun draft the articles of association for debt companies. These articles stipulated that all debt companies must be publicly listed, and their shares must be publicly disclosed. Nominee shareholding was also prohibited; each official could only hold no more than five percent of the shares according to their rank, and all shares had to be sold upon leaving office.

In other words, this is a perk for officials. They have to personally appear in person to receive it.

This makes the interests of officials clearer, and everything is brought to the forefront.

Meanwhile, in order to better investigate the relationships of vested interests, Zhu Youjian assigned the Embroidered Uniform Guard a task: to send people into debt-manipulating companies to gain a deeper understanding of the relationships among officials.

After the task was assigned, it fell to the Tax Police Corps, which is most closely related to taxation and is the violent agency responsible for the compulsory collection of taxes.
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Zhang Maozhong, who is in charge of the Tax Police Corps, has mixed feelings.

The tax police department is somewhat hostile towards debtor companies, because clearing up outstanding debts and investigating tax evasion are also their responsibilities.

Moreover, after the audit, they can also share a portion of the tax revenue, just like debt companies today.

The tax police force made a lot of money from this, attracting many children of high-ranking officials to join.

The tax revenue they recovered provided substantial support for the war effort in Liaodong, and even earned them praise from the emperor.

However, this period of good fortune was short-lived. After the Liaodong War, Zhang Maozhong suddenly found that the work of the Tax Police Corps had become more difficult.

Previously readily available approvals are now either unavailable or delayed.

According to the regulations of the imperial court, without official approval, they could not take coercive measures or arrest people to confiscate materials.

Tax audits are very time-sensitive; if they are delayed, the audited party may either flee, pay back taxes, or destroy evidence.

As a result, the tax police made several unsuccessful attempts to investigate, and were even countersued by the targets of their investigations due to insufficient evidence, drawing criticism from other government departments.

Zhang Maozhong knew that someone was making things difficult for the Tax Police Corps. Moreover, it wasn't just the Tax Police Corps that was being made difficult; the Imperial Guard and many other police forces that cooperated with various government departments had also found it difficult to carry out their work recently.

This is a power struggle between civil officials and the Imperial Guard, who do not want the Imperial Guard to monopolize law enforcement power.

He originally intended to wait until things settled down before resolving the issue, but unexpectedly, the emperor released the debt company.

This could be fatal for the Tax Police Department, as it represents their core authority.

What should companies do if they are subject to tax audits due to debt?
Many members of the tax police were uneasy about this and asked Zhang Maozhong how to deal with it.

Many people are even planning to mobilize their resources to prevent debtor companies from being established or from being involved in taxation.

Now that they had received instructions from the Embroidered Uniform Guard, Zhang Maozhong said to them:
"The establishment of debt companies is now unavoidable."

"Let's not think about blocking them anymore; we need to find a way to get in."

Upon hearing this, the sons of officials immediately began to complain:
"Join? How do I join?"

“Those civil officials seem easy to talk to, but when there’s something to gain, they won’t think of us.”

“Our fathers and grandfathers were civil officials, and now they are hereditary officials.”

Many people were unclear about this point before, but after the current emperor established hereditary officials for the Golden Guard and civil and military officers, those descendants of civil officials who obtained hereditary positions through their ancestors' merits finally understood:

Their ancestors were civil officials, and now they hold hereditary positions. Even if they don't become military officers, they can only serve as civilian military officers.

If anyone still fails to recognize their own position, they will be taught a lesson by the realities of the court.

For example, Liu Qiao, the current Minister of the Imperial Guard, is a descendant of Liu Tianhe, the Minister of War. His great-grandfather, Liu Shouyou, was the first civil official to serve as the head of the Embroidered Uniform Guard and was a descendant of a military officer. He had a very close relationship with civil officials.

However, Liu Qiao's appointment as Vice Minister of the Court of Imperial Sacrifices and concurrently Right Vice Minister of the Ministry of Justice was constantly obstructed by civil officials. Without the emperor's strong support, he would never have been able to achieve his goal.

Even now that he has become the Right Vice Minister of the Ministry of Justice, Liu Qiao is still being suppressed by the Ministry of Justice and is fiercely vying for power with it.

If any of the hereditary officials' sons in the Imperial Guard still stand on the side of civil officials, then they are not qualified hereditary officials.

Zhang Maozhong was certainly a qualified hereditary official, but if he wanted to advance further to become a high-ranking member of the Embroidered Uniform Guard, he needed to firmly establish his position.

Moreover, the obstacles encountered by the tax police during this period also increased his resentment towards civil servants.

He addressed these sons of officials:
"If it's not easy for individuals to join, then let's have them join as a whole under the name of the Tax Police Corps."

"You must remember that only the police force of the Imperial Guard has law enforcement authority."

“Any debtor company needs our support.”

"Otherwise, don't even think about using your law enforcement powers to collect debts!"

These words were spoken with absolute certainty and great confidence.

With the Imperial Guard and the Ministry of Justice vying for power, he had to firmly state his position.

Soon, the Imperial Guard and the Tax Police Corps jointly submitted a memorial, demanding that they would only provide support if the debtor company held shares in it.

Otherwise, if they discover that the debtor company is using violence to force repayment, they will intervene.

This act of trying to snatch food from the mouths of civil officials aroused their great indignation.

They themselves felt it wasn't enough to allocate, so they didn't want others to interfere.

Soon, civil officials discovered some oversights in the work of the Imperial Guard and the Tax Police Corps and impeached them in court.

Many people have even called for the abolition of the Tax Police Corps and the replacement of it with local tax inspectors.

Zhu Youjian would certainly not agree to this. His attitude has always been clear: law enforcement power belongs to the Imperial Guard.

The civil servants kept challenging this point, which made him very angry.

He simply ignored all such memorials.

At most, we should address the issue at hand and order the Imperial Guard to make rectifications.

However, he also explicitly refused the Imperial Guard's request to invest in the debt company, because he did not want law enforcement agencies to have independent sources of funding.

The Tax Police Corps, a joint institution of the Imperial Guard and the Imperial Treasury, can relax a bit.

Considering the profits they had previously gained from tax audits, Zhu Youjian allowed them to invest in debt companies, supervise these companies, and share a portion of the profits.

Moreover, he changed the policy on ministers holding shares, allowing government offices to hold shares.

The various government departments, including those of the central government and local authorities, were to invest in the company according to their jurisdictions. Profits would be shared under the supervision of the State-owned Assets Supervision and Administration Commission and distributed to the officials within these departments.

This treats the imperial tax revenue as corporate profits, only excluding easily collected taxes. Only taxes that are difficult to collect are shared among them.

Under the new regulations, the total shareholding of all companies must reach more than half, thus turning the debtor company into a public enterprise.

Individual shareholding was limited to officials of the fifth rank or above, usually senior officials of various departments or members of the council, who could obtain more benefits.

This policy was piloted in Shuntian Prefecture. Zhu Youjian required the establishment of three debt companies to handle personal debts, corporate debts, and outsourced taxation within the Shuntian Prefecture.

This quantity is far too small and cannot possibly satisfy the officials. Shang Zhouzuo, Minister of Works and concurrently Governor-General of Northern Zhili, said:
"Shuntian Prefecture has many affairs to attend to, and I believe that three debt companies are not enough."

"More debt companies should be allowed to operate, and ideally, all debt companies should have their headquarters in the capital."

This suggestion prompted Zhu Youjian to consider it, and he felt that it was indeed necessary to concentrate resources. He nodded and said:
"The Northern and Southern Zhili regions were directly under the jurisdiction of the imperial court, and all debt companies with their headquarters in the capital were allowed to operate there."

"Each government can choose to cooperate with multiple debt companies as needed. Cooperation agreements are signed annually, and if the performance is not good, a new batch is selected."

Let those debtor companies be established first, competing with Shuntian Prefecture for cooperation.

They will work with the Shuntian Prefecture to improve relevant policies. (End of Chapter)