THE TAXATION OF. MORTGAGES. TO THE EDITOR.

Evening Post, Volume LVI, Issue 74, 24 September 1898, Page 5

THE TAXATION OF. MORTGAGES. TO THE EDITOR.

Sir — In your paper last night you spoke of the tax on mortgages as being income tax. This is a mistake. The tax on mortgages is supposed to be land tax, but it is not, it is property tax, and that is where the uufairness arises. Mortgages are not laud, and never will« be. A mortgagee can only become a landowner if the land is worth less than the amount owing upon the mortgage, and then he can only acquire the laud himself after the expense of a sale by public auction through the Registrar of the Supreme Court, in which case he almost of uecessity loses a considerable portion of his capital. In England, and in all countries where there is a land and income tax, the income derived from the mortgages is taxed as income. In New Zealand there is no tax upon the income derived from mortgages. The present system of taxation is a tax upon land, property, aud income. Land is taxed as land; mortgages are taxed as property, and. the old property tax is retained to that extent; and income, apart from land and mortgages, is taxed as income. The injustice of the present tax is shown •as follows: — If a mortgagee exacts 8 per cent, interest, then his tax (being Id in the £ on the property value of the mortgage) is equivalent to an income tax of Is Ofcd per £ of income, but if a mortgagee lends at 4 per cent, he has to pay a tax which is equal to an lincome tax of 2s Id in the £, or rather more than* 10 per cent, of his income, in addition to receiving a very much, snialler return upon his invested capital. Talcing the present average rate of interest on small investments at 5 per cent, and on large at 4£ per cent., mortgagees now pay a property tax which is equivalent to an income tax of Is 8d and Is lOd in the £ respectively. The interest received is nothing more than income, and the highest tax payable upon incomes under the present Acts is Is in the £, and that should be the tax payable upon income derived from mortgages. Under a specious argument that mortgagees have an interest in land, and therefore that the capital value of mortgages should be taxed as land, the present system of taxation retained in part the old property tax, and is inflicting a grave injustice upon those who lend their money on mortgage of land at a low raKe of interest, thereby enabling farmers and others to properl}' improve their lauds. I hope you will again point out the present i>j3ustice of taxing the property value o£ mortgages instead of the income in future articles. I am, &c, E. Balcombe Brown 21st SoDtember.