Chapter 1464: Chapter 15, Taxation (Anded):
A single word, “avoidance,” turned Hudson from the main actor into a bystander. The various ministers and nobles who were prepared to haggle were left dumbfounded.
If the person involved doesn’t care, how can they negotiate?
Not everyone is as financially naive as Earl Rinnares. Pri Minister Delgado, who ca from a financial background, keenly detected sothing amiss.
Although he hadn’t run a bank, he understood that doing business requires operational costs.
If the bank’s operating costs don’t change and loan interest rates don’t increase, the extracted taxes would co directly from net profits.
Even if net profits could reach 50%, a tax like this would take away 60% of the bank’s profits.
Siphoning profits so ruthlessly, it’s no wonder the nobles, whose interests are affected, would be enraged.
Originally planning to bargain with Hudson, delve into the bank’s operations, and then determine the exact tax rate, but the person involved was uncooperative.
Even when Earl Rinnares proposed a high interest rate of three points, Hudson remained indifferent.
With no other option, Marquis Delgado had to cast a pleading look towards Caesar IV.
Many of those present have invested in banks, but the experience and authority in banking are held only by the Koslow Family and The Royal Family.
“Ahem… ahem…”
After a couple of fake coughs, Caesar IV slowly began, “Bank profits aren’t as high as you all imagine.
After amortizing operational costs, capital costs, and risk gains and losses, the loan interest must be at least seven to eight points to break even.
The Near East Developnt Bank is currently the only one able to compress costs.
If a three-point tax rate is directly imposed, loan interest rates will inevitably rise, severely affecting dostic economic recovery.”
It’s all a stark truth, as the Royal Bank’s operational costs are indeed that high.
The operational costs of most banks on the market are around that figure, so even higher.
On one hand, it’s because the scale is too small to amortize the operating costs. On the other hand, the cost of cash transportation is high, and the frequent movent of funds between branches.
The Near East Developnt Bank has the advantage of scale and the aid of Gold Tickets, resulting in a withdrawal rate far lower than other banks.
The sa cash flow in the hands of the Near East Developnt Bank is utilized over three tis more efficiently.
Besides the interest rate difference, exchange fees are also a considerable inco, which small banks can only envy.
Even Hudson, who got a large loan for free and artificially inflated operating costs, only managed to bring the loan breakeven point down to a little over two points.
If it weren’t for the appealing data on paper, shareholders wouldn’t have repeatedly injected capital.
Of course, you can’t bla the industry peers for not being efficient. Everyone is still exploring, stuck in the cycle of lending what they deposit, without understanding how to leverage.
To be precise, there aren’t many deposits. Much of the money lent out is actually pooled by the shareholders themselves.
If it weren’t for the successful case of the Near East Developnt Bank, with investors unwilling to see their investnts go to waste, they would’ve probably shut down long ago, not bothering with this toil.
Understanding the truth, the first reaction of everyone was disbelief!
It was too exaggerated; how could there be any windfall profits with such high operational costs for a bank?
However, considering that the King himself said this, unless deceived by subordinates, the authenticity of the data couldn’t be doubted.
With heaps of banks scattered across the kingdom, verification would be simple, and no one would dare to deceive so blatantly.
If the data were accurate, the situation becos rather embarrassing.
Among the nation’s myriad financial institutions, only the Near East Developnt Bank, and insignificant money lenders, truly make any real profits.
It’s not feasible to apply differential treatnt; it’s reasonable to crack down hard on usurers. Targeting the Near East Developnt Bank with high tax rates would likely result in an ambush upon leaving the palace.
Even if enacted, such a law would be against fairness, and wouldn’t pass in the Noble Parliant.
Recognizing this, cold sweat began to bead on Earl Rinnares’ forehead.
It was truly frightening; his proposal was effectively cutting off everyone’s financial avenue.
Fortunately, it didn’t pass directly, or whether he would see the sun tomorrow would be uncertain.
“His Majesty is right, the Kingdom Governnt has always been fighting against usury, and raising loan rates must absolutely be avoided.
I think the tax rate should be set at 0.5%!
Now there’s a new lending platform, and for the health of the kingdom’s economy, those unscrupulous usury businesses should be abolished.
I propose we formulate a law clearly stipulating the maximum interest rate for private lending, asserting that excessive loans are automatically nullified!”
Pri Minister Delgado righteously declared.
It’s undoubtedly an attempt to redy the earlier mistake.
Although the proposal was brought up by Earl Rinnares, it was also discussed in governnt etings.
In this age of taxation, laws alone aren’t enough, cooperation from taxpayers is also required.
Once banks are taxed, positive feedback is naturally expected, such as combating the banks’ competitors—usury.
Otherwise, banks might solely falsify accounts, and those tax outsiders might never be able to figure out the truth even until the end of ti.
Regretting the failure to eliminate competitors, Hudson thought to himself, but soon returned to normal.
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