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Chapter 465: Taxation and Administrative Reform

"Low return on investment?"

Joseph frowned slightly. 'Did that mean they weren't making money?' Investing in industry at the end of the 18th century, bolstered by his own advanced ideas, and still not turning a profit?!

Mirabeau said helplessly, "That is indeed the case, Your Highness."

With Mirabeau's help, Joseph quickly found the data on investment returns for various industries in the report. A quick glance confirmed that most industries had returns between 6% and 10%.

While these figures would be impressive in the 21st century, at present, they were appallingly low.

Consider that the current base interest rate for bank deposits was 6.2%, a figure that had already been lowered after the financial crisis eased slightly last year. Previously, it had even been above 7%.

And if one lent money out, it was easy to get 10% Interest.

Under such circumstances, who would be willing to invest their money in industry?

When Joseph saw that the Steel industry's profit margin was only 7.9%, his face immediately darkened. He looked up at Mirabeau and demanded, "Our iron-smelting industry is already extensively using hot blast technology. The profit should absolutely be over 20%. Where exactly did things go wrong?"

He had been busy with the Silesian War for the past few months, and domestic development had indeed received less attention. He had assumed that with various new technologies and Standardized Production, the factories would be raking in huge profits. To his surprise, their earnings barely surpassed bank deposit rates.

Mirabeau awkwardly rubbed his hands and explained, "Your Highness, if sold near the factory's location, profits can indeed reach 20%. However, if transported to Paris or Bordeaux for sale, the profit drops to less than 7%."

Bailly added from the side, "On the other hand, after the signing of the Rhine-Seine River Treaty, our iron products sold to the German region yield nearly 10% profit."

Joseph instinctively asked, "Why is that...?"

Before either could answer, he realized, "Is it because of the local Tariffs in each province?"

"Yes, Your Highness," Mirabeau nodded with a wry smile. "And the various road tolls in different areas are heavily eating into the profits of goods."

Bailly continued, "Some provinces even treat goods transported from other areas as opportunities to get rich.

"Like what I witnessed firsthand last month in Toulouse—tax collectors levied a sales tax on a cart of cloth based on the value of the goods, then at the next intersection, they stopped the same cart again and charged them another sales tax based on the vehicle's size. Yes, just adding a single word made them two different taxes, approved by the Toulouse High Court."

As the representative of the Capitalist Nobility, Mirabeau couldn't help but ramble on with complaints about unreasonable taxes and similar issues.

Joseph's brows soon furrowed deeply as he listened.

Currently, as French industry began to prosper, Tax Farmers and local governments everywhere were finding every possible way to squeeze the last drop of profit from factories.

For example, in Lyon, the center of France's textile industry, the local government astonishingly stipulated that all fabrics leaving factories had to meet certain length and width requirements to be transported and sold; otherwise, they would face fines or even public burning.

Tax Farmer collection teams hovered around factories daily, clutching tax codes and desperately searching for any loophole to levy taxes, making life miserable for the factory owners.

In reality, Joseph knew there was something else the two hadn't mentioned: official corruption. Currently, a large number of officials in France had bought their positions, and these individuals spared no effort in their corruption to recoup their "costs."

Although the Bureau of Impartial Investigation had a certain deterrent effect on officials after its establishment, Marat's energy was limited. It was difficult to detect instances where officials used various means to make things difficult for factories and secretly demanded bribes.

Joseph couldn't help but rub his temples wearily. He had previously focused all his energy on advancing technology, improving management, and increasing factory competitiveness, but he had neglected the issue of the business environment.

The reason Britain had become the world's leading industrial power was not just due to the vast raw material sources and markets provided by its colonies; its domestic environment, offering the best conditions for factory operations in all of Europe, was also a core factor.

Britain had abolished domestic local tariffs decades ago, and its taxation system had undergone several reforms, making it quite transparent and reasonable.

As for the integrity of officials, while British officials were also corrupt—something unavoidable in the 18th century—they were already among the best-situated compared to other nations.

All these factors greatly propelled Britain's industrial development. In contrast, France was still using feudal-era official and taxation systems to manage a nation entering the industrial age.

If left unchecked, even with his advanced technologies and ideas, French industry could very well be crushed by its own Tax Farmers and officials...

Joseph couldn't help but let out a sigh. "It seems we must carry out tax reform as soon as possible."

He silently added in his mind: 'And Administrative Reform.'

Mirabeau and Bailly exchanged glances, then Mirabeau cautiously said, "Your Highness, if I may be frank, even if decrees are passed to standardize taxation, those Tax Farmers will always find ways to circumvent them..."

"You are absolutely right," Joseph nodded, his voice grave. "Therefore, our target will be the Farmers General!"

The Farmers General was the autonomous institution of all Tax Farmers in France.

Currently, France's taxation system was roughly as follows: at the beginning of each year, representatives of the Farmers General would negotiate with the Finance Minister to determine the total tax amount for one or more years, and an agreement would be signed.

Afterward, local Tax Farmers would directly hand over a fixed sum to the French government according to the agreed-upon figure, and then they would be free to collect taxes in a specific region, with all collected revenue belonging to them.

In other words, the French government only issued tax decrees but did not participate in the actual collection of taxes.

The Tax Farmers, on the other hand, maintained their own collection teams, engaging in all sorts of blatant extortion and repeated levies, leading to widespread public resentment and a 'Hate to the Bone' sentiment towards them. While a substantial amount of tax money was collected, the French government only received a fixed sum, leaving its finances stretched thin.

Mirabeau's eyes flashed with surprise upon hearing this, but he quickly became cautious again. "Your Highness, our financial situation... I'm afraid it would be difficult to withstand the impact this would bring."

What he said was an objective fact.

Currently, the bulk of France's fiscal revenue came from the tax farming fees. This money was collected from the Tax Farmers at the beginning of each year, sometimes even for two or three years at once.

If the Tax Farmer system were abolished, the French government would face an empty treasury at the start of the year.

Although the government could collect taxes afterward, that would be several months later at the earliest. How would they manage financial expenditures during this interim?