TAXATION OF LAND

New Zealand Herald, Volume LXXIII, Issue 22489, 5 August 1936, Page 16

TAXATION OF LAND

YIELD IN PAST YEARS GRADUATION REMOVED RESULT SHOWN IN REVENUE The Government's decision to abolish the graduated land tax was announced in the supplementary Financial Statement brought down on October 6, 1931. The then Minister of Finance, the Hon. W. Downio Stewart, stated the position as follows: — "This tax is operating with extreme i hiirshiiess at present, both on rural and urban lands. Jt is not based on any principle of ability to pay, and it has been condemned for many years. I may quote from among many and repealed condemnations tho report of the 1921 iioyal Commission on Land and Income Tax, which stated: — The graduated land tax was originally designed to break up large estates. There is no evidence to show it is required any longer for this purpose, and there was much evidence showing that it is now preventing the development of largo areas of land requiring a considerable amount of capital expenditure to break in. The graduated land tax applied to business premises is a serious handicap to trade and industrial enterprise, and serves no good purpose. "1 propose, therefore, to assist farmers, and also the recovery of trndc and industry generally, by abolishing the graduated land tax, while retaining the flat rate of Id in the pound of unimproved value. Avoiding Double Chargo "The abolition of the graduated land •tax will, of course, involve the elimination of the 5 per cent allowance on unimproved value at present allowed in tho assessment of income tax. This allowance was made to avoid the double taxation involved in taxing tho land and also the income derived from it. "With the llat land tax standing at ]d, a shortage will require to bo made up, which will in part be done by tho abolition of the 5 per cent allowance and partly by the further tax proposals which I will refer to presently when dealing with the budgetary position. I may say, however, that to a considerable extent the burden will fall collectively on tho same shoulders as formerly paid the graduated land tax, although tho individual incidence will be different.

"So far as rural lands are concerned, the taxpayers in tho higher scale above £7500 unimproved value already pay income tax; but it is proposed to make provision by legislation, which will operate from next year, to bring farmers with an unimproved value of £3OOO or over under the operation of the income tax, subject to the usual exemptions. This will mean that all income will then bo treated alike." Income Scale Increased Tho taxation proposals to which the Minister referred, affecting income tax, were threo in number, namely:— 1. Abolition of the 10 per cent deduction previously allowed in the taxation of earned income, and tho establishment, as a special emergency tax, of 33 1-3 per cent surtax on unearned income. 2. Tho inclusion in taxable income, for assessment of the rate, but not for taxation, of tax-free income and income taxed at the source. 3. A special flat-rate tax of fourpence in tho pound on individual incomes, with a general exemption of £SOO. It was estimated that these increases in the income tax levy would cover the estimated loss of £320,000 resulting from abolition of the graduated land tax, and yield an additional £230,000 as an 'increase in ordinary revenue. Land tax yield in /1031-32 was £542,128, a decrease of £603,489 compared with 1930-31. Income tax produced £4,447,814, an increase of £444,208. The yield of land tax from the financial year 1925-26 onward is shown in the following table, the drop in 1931-32 representing the result of abolishing the graduated tax, now being reimposed:— £ .. .. ] n : _>U-'_>7 .. .. 1 ,'J'2!>,oo7 .. .. 3,1 .>l.-ITS) 10-j.s .•_><) ~ .. liijiKto .. .. i,r>o(i,!>ii 11IMU-31 .. .. 1,M5.017 3 >l3l-32 .. .. 54 "J. 1128 3!KSI2-:M .. .. •IDS 'i M JU33-34 .. .. 4HS.W7B 3031-35 .. .. 4 3D3.V36 .. .. 408,873 ♦lUUti-37 . . . . 1,300,000 •Estimate.