Holy Roman Empire - Chapter 74

Chapter 74: Chapter 74: War Tax

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Was there another choice besides expanding the army to ensure sufficient troop numbers? Naturally, to expand the army, money was needed.

Since its establishment, the finances of the Hungarian Republic had been teetering on the brink of bankruptcy.

The nascent government was utterly clueless about financial management. The taxes they managed to collect were squandered before even getting warm in their hands.

In this matter, Kossuth bore direct responsibility. It could be said that the newly formed Hungarian Republican Government had surpassed Austria in corruption and embezzlement.

This issue could be referred to the government after the Xinhai Revolution, where in the absence of the old order and before the establishment of a new order, officials became more reckless without any constraints.

“Mr. Kossuth, the government has already levied war taxes twice this year!” Marquis Roki reminded.

Tax collection in Hungary had always been independent of Austria. During the times when the decayed Nobility controlled the government, taxes were chaotic and the lives of the people bitter.

Everyone had thought that after independence, life would improve. The reality, however, was the exact opposite; without the “exploitation by Austrians,” their lives became even harder.

The new Republican Government granted more power to local authorities, seemingly under the impression that an elected government equaled saintly incorruptibility.

Reality always differed from ideals. Hungary, now following the United States model, not only allowed the Central Government to levy taxes but also granted the same right to local governments.

Simply put, the number of tax-collecting bodies increased without any restraints, providing officials with an opportunity to embezzle funds, to the point where even certain community governments set up a vast array of absurd taxes.

Of course, such chaotic taxes did not need to be paid by the Nobility or capitalists; the common people were the ones who truly footed the bill.

However, war tax was an exception; even the Nobility and capitalists had to pay. That would be acceptable, but the frequency of the collection was what made it intolerable.

How long had the Hungarian Republic been established? Even if the initial preparation period was included, it wasn’t more than three months, was it? In such a short time, war taxes had been levied twice, and now they were demanding a third levy. The enemy hadn’t even attacked yet, and people were being taxed to the point of ruin.

Unlike capitalists who could find ways to evade taxes, the Nobility’s main assets were lands that were plainly visible and therefore not easy to hide for tax evasion.

“Yes, Your Grace.”

“But the situation is beyond our control. Based on the intelligence we’ve gathered, Austria can deploy up to 400,000 troops against us, while our National Homeland Defense Troops number less than 300 ,ooo.

Furthermore, their troops are well-trained regular forces, whereas our own are just workers who’ve put down their hammers or farmers who’ve abandoned their hoes, relying solely on their fervent passion.

The disparity between us is too great. Without an equal number of troops, we stand no chance of winning this war!” Kossuth argued earnestly.

Well, the state of the Hungarian National Self-Defense Force was actually worse than he described, as the ordinary soldiers lacked any fervent passion.

Even their numbers were less than 300,000. The National Homeland Defense Troops were but a ragtag group with lax discipline and rampant embezzlement at every level. The little money that trickled down was insufficient to maintain so many.

But no matter, there was always a workaround to policy, and capitalists were most experienced in this area. Influenced by the practices of the bourgeoisie, the officers soon came up with a creative solution.

Aside from recruiting a few to keep up appearances, the rest could just exist on paper. If inspections occurred, they would temporarily round up people to make up numbers. Since everyone from top to bottom had their share of benefits, no one dared to break the silence.

Of all the Hungarian armies, the only ones with real combat power were actually the student troops. They were the true revolutionaries, fighting for the nation’s independence. The rest, including Kossuth, were no longer pure revolutionaries.

“Mr. Kossuth, I believe it is necessary for the government to disclose its financial expenditures. The Republican Government has just been established, and you’ve already spent what the Hungarian government would normally spend in a year!

If expenditures continue at this rate, perhaps there will be no need for the Austrians to act; you will have collapsed the new government yourselves!” Duke Leopold warned seriously.

That was an embarrassing issue. Kossuth’s face turned ominously dark. Everyone knew the new government’s expenditures were enormous, and he had always used the war as an excuse.

But even before war had broken out, the expenses were already staggering. What would they do if war truly erupted?

International loans? Dream on. No financial consortium dared lend to them, as this meant lending without hope of repayment. Austria was among the great powers and would not recognize treaties signed by these Rebels.

Besides that, there was only the possibility of raising taxes—hardly a good solution. Without addressing internal problems, no amount of money could fill this bottomless pit.

“Certainly, the government can disclose its finances for everyone to monitor. However, we are currently facing financial difficulties and need some funds to overcome this crisis.

This time, the government will not take the money for free. We plan to issue bonds for public subscription, with an annual interest rate of seven percent, aiming to issue 200 million shield (including 11.69 grams of silver).

If the bonds don’t sell, then we will have to levy war taxes just one more time.”

Kossuth chose to compromise, for now he still needed their support. Without the cooperation of Nobility, tax collection would be entirely nonsensical. Therefore, making a reasonable concession was viable.

Seeing the adamant attitude of the Nobility representatives, even the war tax was changed to war bonds, choosing to bear high interest rates rather than to stir the sensitive nerves of the assembly.

From the outset, the Hungarian Republic represented the interests of the emerging bourgeoisie, issuing a series of decrees post-independence to aid the economic development of the bourgeoisie. This included abolishing a variety of harsh taxes that impeded economic growth.

These reform measures earned the support of capitalists but also significantly increased the government’s financial strain, as the economy of the bourgeoisie could not be developed overnight.

Lacking governance experience, the Kosuth Government was advised to issue Hungary’s own currency. Once tasting the sweetness of currency issuance, the cash-strapped Republican Government started printing notes in an attempt to escape the fiscal crisis.

Reality taught Kossuth a harsh lesson—without sufficient reserves, relying solely on governmental credibility to issue currency merely turned it into ornate waste paper.

After the failure of currency issuance, the financial crisis of the Hungarian Republic erupted, and from then on, the path of increasing taxes was set..