DISRATE IMPROVEMENTS

Hawke's Bay Tribune, Volume XXII, Issue 271, 31 October 1932, Page 8

DISRATE IMPROVEMENTS

RATE LAND VALUES ONLY MANIFESTO TO HAWKE’B BAY RATEPAYERS. (Published by Arrangement.) There are three methods by which rates are levied in New Zealand, namely, the capital value of property, the annual value of property, and the unimproved value. The first two methods have been in vogue since the inception of local government in this country, and both are essentially similar in that they are levied on the gross value of property, that is to say, on the value of improvements and the unimproved value taken together. The only difference is that in the one case the rates are Ivied on the capital value, and in the other on the annual or rental value. Either method may be adopted by the resolution of the County Council. Rating on the unimproved value of land was first authorised by the Rating on Unimproved Values Act, 1896, which is now incorporated in the Rating Act of 1925, sections 39-47 inclusive. The outstanding characteristic of the system is that the initiative rests with the ratepayers alone, indeed it can only be brought into operation after a poll has been taken on the demand (not the petition) of a statutory proportion of the ratepayers on the roll. Once it has been adopted it can be rescinded only by a poll of the ratepayers, and for that purpose a demand must likewise be presented to the council, but there must be an interval of three years between polls. Unimproved Rating Popular Amongst Fanners.

There are 122 counties in this country, and of these 54 now rate on the unimproved value, though in several cases, as in Murchison County for example, there is now no official record of a poll, inasmuch as the system was adopted when the existing county was part of a larger county. Excluding these few instances, however, the Municipal Authorities Handbook shows that there have been 55 polls in counties, of which 49 have been successful, and in one case only—that of Castlepoint County—has a rescinding poll been successful. When it is remembered that a poll can be obtained only by collecting the required quota of signatures to a demand, it will be realised that before a poll can be taken, there must be. fairly strong sentiment in the particular distrief in its favour. Moreover the majority of the ratepayers in counties are farmers, and the facts show conclusively that the system of rating on the unimproved value is certainly popular amongst farmers, though there can be no doubt that a small minority of wealthy landowners who call themselves farmers, and who for political purposes are al-ways-ready to ally themselves with the smaller farmers when it will serve their ends, are actively opposed to the new system. The Great Merit of the System. The great merit of rating on the unimproved value—and this is equally applicable whether in town or country —is that it exempts improvements from taxation, thereby encouraging industry and placing a corresponding penalty upon the mere holding of land. Inasmuch as it sometimes happens that wealthy ratepayers are the greatest improvers, it must necessarily follow that in some instances wealthy companies and individuals will pay less local taxation when improvements are exempted than they would necessarily pay if the rates were levied on the capital or annual value. As Mr Winston Churchill once said, however, the proper question for the tax-gatherer to ask the taxpayer is not, How much have you got? but, How did you get it? We hold that all taxes on earnings—that is to say, on production—are wrong, for the reason that they discourage production. A tax on the unimproved value of land, however, must necessarily encourage production, for the reason that it does not fall upon earnings, but upon what is really a community fund due to the presence and progress of the community.

Opponents Sidetrack The Real Issue.. There is a fundamental difference between capital which is applied to production, that is to say, the improvement of land, and capital which »is utilised merely to hold land idle. In the one case capital is discharging its proper function, in that it is really co-operat-ing with labour, since the constant application of labour is necessary to maintain improvements and to keep them in a state of efficiency. Accordingly the capital so applied means the contant employment of labour, and hence it is being continually used in production. Capital applied in merely holding land idle, however, or in holding it in a state of partial improvement, is preventing the employment of labour and checking production. The system which taxes improvements encourages this undesirable non-use of land, whereas to levy rates on the unimproved value is to give the maximum encouragement to the utilisation of land. When these principles are borne in mind ratepayers will be able to assess at their real value the attempt now being made to side-track the real issue by directing attention to the fact that certain wealthy companies will pay reduced taxation if rating on the unimproved value is adopted. In every case the companies in question are engaged in a beneficent local industry and that the very best encouragement than can and should be given them is to rationalise the system of local taxation by exempting their improvements. The Question For the Ratepayers. No matter which of the three systems of rating is adopted, exactly the same amount of revenue will be required in the one case as in the other. Accordingly, we agree that by adopting rating on the unimproved value the aggregate amount of local rate-revenue will be the same. This is actually given by some opponents of unimproved rating as a reason for retaining the present system, but it is exactly the reason why a now system should bo adopted. In the great majority of eases, the value of improvements exceeds the unimproved value, and it must follow that

the majority of the ratepayers will savo money by the change proposed. In some cases, of course, the amount will be the same, and in comparatively few eases the rates will increase. On examination, however, it will be found that in every case the increase will apply only to those ratepayers who are rich enough to afford the luxury of holding land either idle or only imperfectly improved. Thus it is for the ratepayers themselves to consider whether a system is just which makes every improvement the signal for increased taxation, or whether the time has not arrived when improvements should be exempted and those who are favoured beyond their fellows with special privileges should be obliged to pay a greater share than heretofore out of the community i’und which they are permitted to enjoy. No Reason For Delay, It has been urged in certain quarter* that the poll should be held only after the county has been revalued. But section 47 of the Rating Act provides that as soon as conveniently may be after an adopting proposal has been carried in any district, a valuation roll of the rateable property in the district shall for the purpose of rating on the unimproved value be prepared and supplied by the Valuer-General. In other words, the adoption of the new system makes a re-valuation unavoidable. Apart from that fact, however, there is no reason whatever why the ratepayers should be asked to defer action until the valuation now in progress has been completed. In conclusion, the objections now being urged against the adoption of the system in Hawke’s Bay county have been urged in every case where a poll has been taken. Had sueh objections been entertained the system of rating on the unimproved value would never have been adopted in any district, and there would be no instance in this country to-day to which one could point where improving settlers are relieved and non-improvers proportionately penalised. Rating on the unimproved value of land must commend itself to every person who will give the question of taxation unbiassed consideration in the light of sound economic principles.