I flipped through our account books, looking through the amounts listed, double-checking and triple-checking to ensure that the amounts were correct. The conclusion to which I was led was grim. I turned to Rosalind, who was seated across the table from me sorting through her own pile of documents, and grimaced.
“Yep, no dice. Assuming we get the same level of business as we did last month, we can safely keep ourselves afloat with our current savings for about a year, but after that we run dry.”
Rosalind showed a pained expression.
“Well, we were operating on a low profit margin already anyway, so that’s not much of a surprise.”
The new taxes that had been levied totalled 50% of our monthly earnings. After taking into account the price of the ingredients and alcohol we used, we generally came out with a monthly profit of approximately 35%. In other words, we were effectively being taxed a higher amount than what we were bringing in. We were bleeding.
In this situation, where we were being asked to pay money we did not make, our only recourse was to use the money we had saved up through prudent management to pay the outstanding taxes.
“Well, if we look at it positively, we have enough money saved up to pay the taxes for a little while, at least, but…”
“That’s not sustainable. I know, Ely. Even if we could keep going longer, there’s no point to running a business if it’s going to lose us money.”
“Mmhmm. Not to mention that the tax increases on our patrons might cut into our profits even more. We might not even be able to last a year.”
The new taxation laws were being imposed on the whole region. We were hardly going to be the only people affected by it. These taxes would put a strain on the disposable incomes of our patrons, so it was likely that we would soon see a decline in demand. However, even if the demand eventually recovered to its current levels, it did not change the fact that we were being taxed for more than our profits.
In other words, the saved-up reserves were, at best, a means to buy time to come up with a more lasting solution. The problem was trying to discern this solution.
“Well, maybe we can cut costs somewhere?”
“We would need to cut costs enough to increase our profit margin by at least 15%, and even that would be just breaking even. Not to mention that it’s unlikely we’ll be able to do much, considering we’re already purchasing ingredients exactly at market value and that I’m not technically paid for my services. Any cuts now would affect our quality.”
“Hmm… what about lowering the prices on our items? Since it’s a tax on earnings, that should lower the payable amount, right?”
“Yes. It would also lower our profits. We would still be in the red.”
“Ugh… Maybe we could under-report our earnings?”
“Ros, that’s illegal. Also dangerous. If we get found out you might have your land confiscated. You might even go to prison. And it’s not like it’s easy to hide, either. Under-reporting it by maybe 5% would be insignificant enough to cover up, but that 5% wouldn’t make enough of a difference to pull us out of this problem, and anything more would be easily found out through observation or inspection. I’m not saying it’s not an option, but that should be our last resort, if we really can’t think of anything. As far as possible, it would be wise to stay within the bounds of the law.”
Rosalind leaned forward and planted her face on the table, sighing. All her suggestions had been shot down.
“Ely, weren’t you on my side…?”
I giggled a little, in spite of our dire situation.
“Of course I am. That’s why I’m shooting down the stupid ideas, so that you don’t have to waste time dwelling on them.”
“Ugh… I’m no good at this. Ely… what should we do…? I don’t want to close down…”
Well, in all honesty, Rosalind was doing remarkably well for a business owner who had only plied her trade for a couple of years. The current situation was just one that was beyond the norm – even an experienced merchant was unlikely to be able to deal perfectly with such an unanticipated tax spike, and Rosalind was far from experienced. That said, I was no expert when it came to matters of running a business. I just handled advertising. I did, however, have some experience with tax evasion – though the methods I was familiar with back in my world could not be replicated here due to technological and bureaucratic limitations. Even when I tried to apply the principles behind them, they did not quite work out in this situation.
I glanced at the dejected Rosalind and voiced the option that was obvious, but infuriating.
“Well… it seems we don’t have a choice… We should stop selling alcohol.”
A long sigh escaped Rosalind’s lips. Certainly, that was the fastest way to resolve this. The biggest component of the tax that had us worried was the 40% alcohol tax. If we stopped selling alcohol, there would be no justification to make us pay this tax. The employment tax was far more manageable, and if we could just avoid the alcohol tax, it would resolve most of our problems. It was a simple solution, but it left a bad taste in my mouth. Rosalind’s next words, spoken without lifting her head from the table, confirmed that she felt the same.
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“So, in the end, we’re doing what that asshole wants, huh…?”
“It’s annoying, but yes. We don’t have much of a choice.”
The true intent of Lord Rishard’s alcohol tax was clear as day to me. I was not sure whether it had been quite as obvious to Rosalind, but despite her relative inexperience, my friend had a sharp mind. It was unlikely that she had missed the subtext.
A tax on the earnings made from places which sold alcohol was a strange way of imposing a demerit tax. Normally, if one truly wanted to inflate the price of a good and thus make it undesirable, one would simply impose a tax on the good itself – the people who sold alcohol would pay a tax based on the price of the item for each item sold. This would cause taverns and other providers to drive up their prices in the name of preserving the profit line. It made no sense to tax a business’ earnings merely on the basis of it serving alcohol. Even if the building sold no alcohol in a month, it would still suffer a penalty for simply having it on the premises. In other words, the people who happened to sell alcohol were being unjustly punished for it.
Let us ignore for the moment the economic contractions that depriving one’s people of their livelihoods would cause, and instead assume that the ruler in question is seeking to unjustly tax the citizens to fill his own coffers, uncaring of what happens to the country. If that was the case, having such a clear-cut premise of “selling alcohol on the premises” was counterproductive to that goal. It was a premise easily avoided, as one could simply stop selling alcohol, and thus completely avoid the tax. If anything, that seemed to be the point of this tax: to get businesses to stop selling alcohol.
If we assumed – for argument’s sake – that Rishard truly wished for the country to sober up, this tax would make a modicum of sense, but would still be flawed in its execution. Alcohol was a vice that permeated society to its roots. In creating a situation where it made no financial sense for honest businesses to sell alcohol, those that would benefit the greatest were dishonest businesses. I suspected that it would not be long before black markets dealing in alcohol started to appear and prosper. For if the citizens could not indulge their vices through legal means, they would turn to illegal ones.
Regardless of how inexperienced or foolish the new Lord was, he was still a man who had received a noble’s education. Furthermore, he was surrounded by advisors who had been around since his father’s time – advisors tempered by age and experience. Even if he had not realised the problems with his tax, surely the advisors would have come to the same conclusions as I have. Furthermore, given the rumours and tales which surrounded Rishard, his initial premise – that he wished for the land to sober up – was likely to be complete nonsense. Therefore, if he still imposed this tax – nearly a ban, as it were – while recognising the problems with it, it meant that he had some other intention behind it.
“Ugh. Hey Ely, how long before we start seeing his name on the liquor bottles?”
“Eh. I don’t think he’ll be that blatant about it. Probably just ‘special licenses’ issued to people whom he declares virtuous enough to be exempted from constant taxation.”
In other words, Rishard’s plan here was likely to monopolise the alcohol trade. He could come up with any reason to grant tax exemptions, earning favours or money in return. It was an infuriating scheme, but one we could do nothing against, given the difference in our status.
“Hey. Ely. Go beat him up, please. Take over as the Lord.”
“…As much as I’d like to do the first, I’m going to have to say no. And the second is just out of the question.”
“Come on, I’m sure you’ll do a good job of governance.”
“No thanks. I’m a pacifist. Not interested in fighting. Much less insurrection.”
“…Welp, there goes that plan…”
We mutually vented our annoyance in casual banter. Then Rosalind looked up and matched my gaze.
“Well, if you say we should stop selling alcohol, then we’ll stop. Looks like there’s no other way, anyway. But then…”
“You’re worried about the shop, right?”
“Yep. A tavern that doesn’t sell drink… that’s ridiculous, no matter how you spin it.”
“Well, we could always rebrand ourselves as a restaurant.”
“Ely, did you forget the reason I set up a tavern in the first place? A restaurant doesn’t have the same atmosphere. People are a lot more reserved. They don’t open up to me. If I convert this to a restaurant, I won’t be able to hear the stories I so deeply cherish.”
I leaned my head on my palm, resting my elbow on the table, thinking.
“Well, maybe you can turn it into a cafe?”
“That’s… the place you mentioned, that sells only coffee and tea, right?”
“Well, usually it serves confections and light meals as well, but that’s the gist of it.”
Rosalind shook her head.
“Maybe the concept works in your world, but over here it’s different. People don’t gather to drink coffee or tea; that’s done in private, in one’s own home, when idly passing the time with family or when entertaining guests. Nobody makes the effort to go out purely for coffee. Such a store wouldn’t survive.”
“Well then, we’ll just have to change that, won’t we?”
“Didn’t you hear me?! I said that it won’t work!”
Rosalind slammed her hand on the table, narrowing her eyes. I glared at her disapprovingly. Clearly, she was a lot more on edge than she let on. Realising that she was being unreasonable, she averted her gaze.
“…sorry. I’m just really annoyed right now, what with that idiot’s scheming. I know you’re trying to help, but it doesn’t help when you’re suggesting ideas that I know won’t work.”
I raised an eyebrow and crossed my arms, fully displaying my displeasure.
“And exactly how do you think I felt when you brought up dumb ideas like under-reporting our earnings?”
“…I have no comment.”
Rosalind was visibly reddening from being made aware of her own hypocrisy. Well, I did not quite blame her for her outburst. I myself was feeling rather irritated – I had simply gained many times more experience in controlling my emotions than she had. I crossed the table to her side and patted her on the head.
“I get what you’re saying. People in this world don’t go out for coffee. They drink it at home. So all we have to do is to change that. Well, to be honest, it doesn’t have to be coffee. It can be anything. We just have to make them want to come to this store even if we stop selling alcohol.”
Rosalind looked up, catching my eyes. I do not know what kind of expression I was wearing, but whatever it was caused the doubt in her eyes to fade.
“Do you have an idea?”
“Well, at the very least, I have the seed of one. Leave this to me. Making people want things is, after all, one area in which I have considerable expertise.”