Chapter 512: Capturing Idle Capital
Once Charles' 1.2 million franc loan was credited to the treasury, the High Court promptly lifted its investigation and restrictions on the Charles-Botten Bank.
To outsiders, it seemed like a routine investigation lasting only seven or eight days. In this era, banks frequently engaged in questionable practices, so being investigated was nothing unusual. However, few realized that Charles had narrowly avoided losing half his fortune.
Fulde gestured for silence among the gathered members of the Tax Farmers' Association and continued:
"At present, the government seems fully capable of abolishing the tax farming system. However, we are not completely defeated!"
He turned to the British banker seated nearby.
"Next, we will implement Mr. Goldsmith's suggestion: use the tax records as leverage to negotiate the farming of key taxes—salt, alcohol, tobacco, and market taxes."
These were among the most profitable taxes. Market taxes, while relatively small in amount, provided a convenient cover for selling under-the-table goods under the guise of tax collection.
Hoppe immediately nodded in agreement. "You're absolutely right. As long as we stand united, we can pressure the government to grant us control over these taxes.
"For this, it is critical to gather as many tax records as possible here at the association's headquarters."
He turned to a middle-aged man with burn scars on his face. "Mr. Lafayette, you will oversee the organization of the tax records previously managed by Charles."
"Understood, Mr. Hoppe."
With Fulde and Hoppe's encouragement, the room's atmosphere shifted. The once somber tax farmers regained their confidence, enthusiastically discussing how to allocate the remaining tax farming opportunities.
Unlike the confident elites of the Tax Farmers' Association, thousands of smaller tax farmers across France—especially those with only a few thousand or tens of thousands of francs to their name—were overcome with panic and anxiety.
The association had repeatedly assured them that it would negotiate an agreement with the government, allowing tax farming to continue the following year. Trusting these assurances, they had held onto their funds, ready to pay the farming fees once an agreement was reached.
But when Charles publicly declared his support for tax reform and loaned his entire farming fund to the French government, it sent shockwaves through their ranks.
The move clearly signaled that the abolition of the tax farming system was inevitable.
Most small tax farmers lacked investment experience, having relied on farming fees as a habitual and dependable way to grow their savings. Now, faced with the sudden prospect of reform, they were at a loss.
Unbeknownst to them, the Tax Farmers' Association intended to use tax records to negotiate with the government. Even independent tax farmers, like Lavoisier, with tens of thousands of francs in capital, were left in the dark. The fewer people aware of the plan, the better it could be kept secret.
As the year's end approached, with no word from the association regarding new farming agreements, many smaller farmers began seeking alternatives.
Their options were limited to buying government bonds, depositing their funds in banks, or purchasing land.
None of these options came close to the returns offered by tax farming. Land purchases, in particular, were fraught with complications—finding suitable plots and managing operations to avoid losses was no easy task.
One such tax farmer was Sylvie Fenot.
Fenot primarily ran a glass shop, managing to invest 7,000 francs annually in tax farming.
He sat in a café on the west side of town with seven or eight partners, with whom he had pooled funds to secure the rights to a quarter of the city's operating taxes. They were now discussing their plans for the coming year.
"I think we should buy government bonds," one suggested. "I heard the interest rates will drop next year, so buying before year's end would be more cost-effective."
Another shook his head. "Government bonds offer low interest rates. Unless you buy long-term bonds of 10 years or more, you'll be stuck if you need cash in an emergency."
Fenot sighed. "If only we could invest in the Industrial Development Fund. I heard the returns this year were as high as 13%."
A partner replied bitterly, "Too bad the fund no longer accepts small investments. We can't scrape together 200,000 francs. When it was open last year, we could have invested for as little as 1,000 francs."
One of the group grumbled, "The bigwigs at the association have really let us down! Just last month, old Yasen asked me to invest in his textile factory, but I turned him down because I was waiting for the farming agreement."
As the group sat in frustration, the café door swung open. A middle-aged man with brown curls entered, waving a newspaper.
"Gentlemen, have you seen the government's announcement?"
"Eric, you're late," Fenot greeted him. "What announcement?"
Eric brushed past the coffee cups and spread the newspaper on the table. "Hot off the press! The government has introduced a 'Tax Reform Fund' to compensate tax farmers for their losses."
He pointed at the text. "It's only open to tax farmers, and the investment amount is capped at the previous year's farming fees."
Fenot immediately asked, "What's the interest rate?"
"It's the same as the 10-year government bonds. Plus, if the government's tax revenue improves next year, investors will receive dividends. And here's the best part: you can redeem the fund as early as six months."
Fenot and the others brightened at the news.
Who would have thought the government could be so accommodating? While the fund's returns didn't match tax farming, it was the best investment option currently available.
A bespectacled man stood up urgently. "We need to act fast! The fund has a cap. If we wait, it might sell out."
The group hastily threw down money for their coffee and hurried to the bank listed as the fund's trustee.
The Tax Reform Fund was Joseph's plan to attract idle capital from the tax farmers.
He understood that the Tax Farmers' Association controlled only 40% of total farming revenue, while the remaining 60% came from smaller farmers. Without tax farming, much of this capital would have no clear destination.
The fund offered slightly better returns than most market investments, but its interest rate was far lower than the rates charged by financiers lending to the government.
The stipulations that it was "only for tax farmers" and "had a cap" were mere psychological tactics—akin to modern scarcity marketing. The French government urgently needed funds, and any investor willing to make large contributions would be met with "insider" assistance to bypass the supposed cap.
As Joseph anticipated, the Tax Reform Fund raised 37 million francs within 10 days—just from sales in Paris and surrounding provinces. As word spread to farther regions, the figure would climb rapidly.
While Paris buzzed with tax reform efforts, elections for provincial assembly representatives were underway in Corsica.
Unlike previous elections dominated by the royalist Paul faction, this year's contest featured four highly competitive factions vying for influence.
Thank you for the support, friends. If you want to read more chapters in advance, go to my Patreon.
Read 40 Chapters In Advance: patreon.com/johanssen10