A large part of your income comes from taxing your vassals.
The formula is:
Liege Taxes = (Demesne Taxes + Sub-vassals Taxes) x Opinion Modifier x Tax Law
- Demesne Taxes are the direct taxes from his demesne.
- Sub-vassals Taxes are the indirect taxes from his own vassals, if any.
- Opinion Modifier is the opinion of the vassal toward his liege. It is 100% if the opinion is positive, otherwise it is the negative opinion as a percentage. For instance: 80% at -20 opinion, 50% at -50 opinion, and 0% at -100 opinion. In particular, in case the capital of the vassal doesn't correspond to his status (Lord Mayor under feudal Duke), a wrong government type opinion penalty of -30 is applied.
- Tax Law is the percentage of taxation depending on the Demesne laws for that holding owner type (note: it is not based on the holding type, but on the type of character). It ranges from 0% to 55%:
Now that we know how tax works and what affects it, we can now work out how to maximize it. First we've got simple construction, which will directly increase the income of a holding, which will trickle down as tax. Constructing buildings in your vassals' holdings gives less of a return on your investment than building in your own demesne. As such, when seeking to maximize income, you should build as many income buildings in your demesne as possible.
Next, you can increase the tax law to make your vassals pay more. However, if their opinion is already low enough, this will not pay off, with a full list here:
- 10% -> 20% gives more as long as opinion is originally above -80 (0.1 * 0.2 = 0.2 * 0.1)
- 15% -> 25% gives more as long as opinion is originally above -75 (0.15 * 0.25 = 0.25 * 0.15)
- 20% -> 30% gives more as long as opinion is originally above -70 (0.2 * 0.3 = 0.3 * 0.2)
- 25% -> 35% gives more as long as opinion is originally above -65 (0.25 * 0.35 = 0.35 * 0.25)
- 30% -> 40% gives more as long as opinion is originally above -60 (0.3 * 0.4 = 0.4 * 0.3)
- 35% -> 45% gives more as long as opinion is originally above -55 (0.35 * 0.45 = 0.45 * 0.35)
- 45% -> 55% gives more as long as opinion is originally above -45 (0.45 * 0.55 = 0.55 * 0.45)
As such, higher tax will almost always equal more income, but this does not take into account the hit to levies, nor the chance of rebellion. For Catholic clergy, it's best to leave clergy tax rates at 35%; any increase might anger them to the point whereby they pay taxes to the Pope and withhold levies from you.
Changes due to Conclave DLC
With the Conclave DLC active, tax laws are replaced by obligation laws, which allow the ruler to shift the focus of the obligations of the realm's vassals, between more taxes or more levies. This also means that laws concerning taxes will no longer increase or decrease vassals' opinions.