UNPAID LAND TAX

Dominion, Volume 19, Issue 118, 12 February 1926, Page 9

UNPAID LAND TAX

INNOCENT PURCHASERS HARDSHIP CASES: MB. CLARK TO REPORT The important question of giving relief to persons who have suffered hardship through buying land on which there were due arrears of land tax (unknown to the purchaser at the time of his purchase) has advanced another stage, through the appointment of Air. D. G. Clark (until recently Commissioner of Land and Income Tax) as a special commissioner to inquire into such cases of hardship, or alleged hardship, and to (report thereon. Where land tax is unpaid, the Commissioner of Land and Income Tax may recover not only from the person who owned the land when the tax became due, but from the debtor’s successor-in-title, also from the debtor’s mortgagee, and even from the debtor’s tenant. If the question were asked why these other people should be liable for laild tax unpaid by the defaulting former owner, the theoretical answer would be that each of the three (successor, mortgagee, tenant) is able to protect himself. Firstly, the successor-in-title is able when purchasing (or his lawyer is able) to search the title, discover the taxation due, and deduct it from the purchase money before paying over. It is the successor’s own fault if he neglects. (There is a weakness in this argument, as will be indicated below.) • Secondly, the mortgagee is entitled to have unpaid tax added to the capital value of his mortgage, and to claim interest on it; this fact (it is argued) protects him—as long as • he* has a margin of security. Thirdly, the tenant can protect himself bv deducting from the rent he pays.

So much for theory, and in the great bulk of cases the theory works out soundly, but in practice certain difficulties have arisen. The weakness in the argument concerning the liability of the successor-in-title is that the provision of the law by which the Commissioner’s claims for land tax due are registered against title was taken out of the statutes in 1916 and was not restored till some years later. There was thus a hiatus during which registration of land tax debts against title was not proscribed, hence some titles might not show the information that the purchaser should look for, and his assumption that there was no such debt might reasonably follow. This inconsistency in the law’s requirements is considered as explaining—and, bj some people, as excusing—the action of a purchaser who buys land without first discovering

the land tax liability and deducting it from the purchase money. Such a case is of course only one type. There are many other kinds; and, before Parliament legislated to give relief in cases of hardship, it was shown that the circumstances differed widely. The classic case of hardship was that in which a speculator had owned (say) £lO,OOO worth of valuable suburban land, had failed to pay land tax, had subdivided and sold at high prices to small lionie-builders (probably financed by State advances), end had then himself goiie away or died or gone bankrupt. Small lionie-builders placed in such circumstances were deemed to be the least likelv persons to know that a land tax liability was about to be apportioned among them; they were badly placed either to know the risk or to bear its weight. On the other hand, some mortgagees who had foreclosed on tax-laden land, and who had foreclosed profitably, were considered to be under no hardship through not knowing as much as a mortgage should have known about the unpaid tax. The position ot mortgagees differed in different eases. In fact, so much did each case depend upon its own merits, that no hard and fast rule could be made, and Parliament decided to set up a commission to advise and report. It is considered that in selecting Mr. . Clark to lie 'he Commissioner to inquire under the legislation of last session, the Government has secured a man specially fitted by his experience to know how the present complications over unpaid land tax have arisen, and wlint degree of hardship attaches to particular cases. He is required to report his recommendations not later than April 30 next. The proceedings will be confidential.