OUR FREEHOLD LANDS

New Zealand Times, Volume XXIX, Issue 6315, 16 September 1907, Page 8

OUR FREEHOLD LANDS

HOW THEY AKE HELD. AN INTERESTING RETURN. (By P. J. O'Rcgaa.) An interesting Return is ParJamontary Paper 15.—17 A, 190/, ivhioh was recently presented to Parliament. At the first glance, t looks nothing more than an minforming array of figures, but a acre critical examination proves it to ■/j a useful and instructive document, i'ho Return contains an introductory note bv the Valuer-General (Mr G. P. ’I. Campbell), slating that, with the exoption of Table 10, the information /ompilod relates solely to the freehold nuds of individuals and companies. I'ho lands owned by tho Crown, Natives, vocul bodies, church, education, and friendly societies are not included, nor Jo data concerning any leasehold lands appear in tho tables. With a view to popularising tho mass of information contained in tho Return, I have made ■.lie following analysis, and have also /.upplemented tho samo with information culled from other sources. Beginning with Table 10. we are able to make interesting comparisons as to Mie VALUE OF OUR LAND. The total capital value of all tho vaud in the colony was in .£122,223,029, and in 1906, £215,4—.00-, an increase of £96,197,523. ihe unimproved value—that is. the capital -value minus the value ol iniproveiiiciiis -C7a.787.895 in 1891, but in 1906 it had mounted up to £137,168,548. these figures, as Mr Campbell is careful to point out, cover ail tho land in New Zealand; but Table 4 shows us that the unimproved value of the freehold lands exclusively was on the 31st of March, .1006, -£100,232,247. This would leave £36.936,301 as the unimproved value ot vail the other lands to which the Boturn loes not relate: . , , , , Table 1 shows us that tho total capital •ralue of tho freehold lands is £161.771.758. Deducting the unimproved ralue from that total, we find the freeholders own improvements to tne ralue of -£61.539,511. I am bound to ay that the proportion of improvements scorns small, and, it is very probable, not that tho value of improvements has been under-estimated, but that tho unimproved value has been over-esti-mated, in consequence of the prevailing land "boom/' Of, this, however, I will say more later. NUMBER OF FREEHOLDERS. The total number of freehold proprietors in the colony is 128,019, and the reader will be surprised to notice two •conspicuous facts —tho large proportion j who own. town lands, and the number of small proprietors. Here are facts: — Owners of Town Lands Solely 82,951 Owners of Country Lands Solely 38,875 Owners of Both Town and Country Lands ... ... 6,193 Total Owners, All Freehold Lands 128,019 j We thus see that 64 per cent, of the j freeholders of New Zealand are owners of town properties. Examination discloses results equally astonishing in respect of the classification of landowners. For example : 48,117 persons own properties having; , «#acl- an unimproved value not exceeding . £IOO. 00,372 persons (including those re-1 ferred to in the last paragraph) own j properties having each on unimproved I value not exceeding .£SOO. I The foregoing 96,372 owners represent l a total unimproved value of .£13,088,607.; 13,227 persons own properties having *aoh an unimproved value not exceeding £IOOO. ' The 13,227 owners mentioned in the paragraph last preceding represent a total unimproved value of £‘9,669,635. Adding these two groups together, we find that 109,599 landowners represent a i . total unimproved value of £22,758,242, or an average of about £217 per owner. l This means that the remaining owners,; totalling 18,420, represent a total unimproved value of £77,474,005, or an average of something like £4210 per owner. These figures show incontestably that there is gross inequality in the ownership of the freehold/ lands of this country. THE £SOO EXEMPTION. The Return throws an interesting light on the effect of the exemption under the land tax. This is commonly called "the £SOO exemption/' which is naturally understood by tho average man to mean that the unimproved value up to £SOO is exempted from tho. land tax. The exemption, however, really means much more than its name implies, as the following exposition of the facts, will show:— (1) Every freeholder, the unimproved value of whose land does not exceed £SOO, is exempted from land tax altogether. (2) Every freeholder, the unimproved •value of whose land does not exceed £ISOO, is allowed to deduct £500; that is to say, he is taxable on £IOOO only. (3) Above the unimproved value of £ISOO, the exemption diminishes at the rate of £1 for every £2 of unimproved value. Hence, every property ranging from £ISOO to £2500, unimproved value, is allowed amount or exemption. A property of £2OOO, unimproved value, for example, would be allowed exemption of £250; that is to say, only £1750 would be taxable. It will thus be seen that the popular notion that the unimproved value is exempt only to the extent of £SOO is entirely wrong. The exemption is the cause of a serious Annual loss of revenue, and. as the number of small holdings will continue to increase, the loss will ultimately become so serious that the situation will fore© itself on the consideration of the Government of the day, THE MORTGAGE TAX. As the law stands at present, the ■ mortgagee is, for the purposes of the land tax, regarded as the owner of the. land mortgaged. The mortgagor is allowed to deduct from his taxable balance the value of all mortgagee, and the land tax is charged on the mortgages to the mortgagee. The most cursory examination will convince the reader that this involve© a grave infraction of the cardinal principle of the. land tax —the exemption of improvements. The mortgage is held in respect of the gross (or capital) value of land; that - is to say* it is held over both improvements and unimproved value. Hence, it follows that the mortgage tax must necessarily imply more - or less taxation of improvements. What is the remedy for this admitted anomaly? To my mind, either of two methods could be chosen. First, we might ignore the mortgage altogether, and charge the land tax to the mortgagor, without paying any regard to the existence of a mortgage; or, secondly, wo might regard the mortgagee and the mortgagor partners in the land, calculate by simple proportion the interest of each in the unimproved value, and charge land tax accordingly. Here, for example, is a property, worth £3OOO, which is mortgaged for £2500. The unimproved value is £I7OO, leaving £I3OO as the value of improvements. A sample calculation shows that the respective shares of the mortgagee and mortgagor in the unimproved value is £1416 13s 4d and £283 6s Sd. This method of assessing the tax would be ideally perfect, and would bo no more difficult than the existing system. For practical purposes, however, the first method is the simplest, and could be found equally equitable. The object of the present system is to exempt the mortgagor, but, as a matter of fact, the object is not attained, for it is obvious that the mortgagee can easily protect birn«ftlf bv adding the mortgage

tax to his interest charge. Thus either of the methods X suggest would he preferable to the existing method of assessing mortgage tax. A’e arc now able reachly to estimate tho annual loss on account of the £SOO exemption, bv finding what one penny in tho pound would amount to on the total unimpioved value of all, the freeholdsnamely, £100,232,247, adding to that the amount of the graduated tax, and deducting from the amount that is ac-; tuaily received as land tax revenue. 1 The difference would represent exactly; the lost, entailed by the exemption; but, unless able to show tho extent to which improvements are taxable under the mortgage tax, we cannot estimate accurately the difference between a land tax without exonijitions and the present system. HOW THE REVENUE IS AFFECTED. Thus we are able to form an idea of the sieve-like effects of the exemption on the revenue. if the ordinary land tax of one penny in the pound were levied on tho unimproved value without exemption, the revonuo last year from that source would have Jjeen £417,034. The graduated tax, which Is levied in addition to the ordinary land tax on all pro- ■ pertics exceeding £SOOO, unimproved value, produced last year £126,000, which, added to the revenue from the ordinary tax, as it would have stood, had there «>oon no exemption, would have made a total of £543,634. Now tho amount actually received was £417,332, or £96,302 less than would have been obtained had there been no exemption. As already pointed out, the tendency is, and must be, for small landholders to increase in numbers, which is another way of saying that the number of exemptions must continue to increase, and hence, that tho revenue from the land tax, though it may creaso, will actually diminish, unless and until the problem of the exemption is faced. NUMBER OF LAND TAX PAYERS. As alreadv stated, the number of freeholders m tho colony is 128,019; but it is quite clear that no land tax is paid by the 96,372, the unimproved value of whoso properties does not exceed £SOO. That means that the actual number of freeholders who pay land tax is tho difference between 128,019 and 96,372, or 31,647 owners. Of this number, as we have seen, there are 13,227 owners, tho unimproved value of whose properties each does not exceed £IOOO, and as every one of this group of owners is allowed to deduct £SOO from his taxable balance, we can readily see how much land tax they pay by a simple process, as follows This group of 13,227 owners sent a total unimproved value of £9,669,635. Multiplying tho number of owners in this group by 500, we get £ (13,227 x 500) equals £6,613,500, representing the total unimproved value belonging to this group, which is exempt from taxation. Subtracting the value thus exempted (£6,613,500) from tho total unimproved value, wo get £ (9,669,635—6,613,500), or £3,036,135, which is the amount on which this group of owners pay land tax. One penny in the pound, tho amount of the ordinary land tax, levied on this taxable balance, produces £12,734, or slightly in excess of £1 per owner per annum.. If there were no exemption, this group would have paid last year sometning like £40,290, or about £3 per owner—not an excessive amount, surely, for men, the unimproved value of whose lands average more than £730 each? Deducting this group of 13,227 owners from .the 31,647 land-tax payers, we get another group of 18,420 owners, who represent a gross unimproved value of £78,474,003, ox an average of £4805, or nearly seven, times a greater average than that of the group last considered. Once again, it may be pointed out how conclusively the official data prove the enormous disparity as between the smaller and more numerous owners and tho few wealthy men, who monopolise by far the best and largest areas of the freehold lauds. TOWN AND COUNTRY FREEHOLDS.

W© have already noted that of tho 128,019 freeholders, 82,951 are owners of urban lands, 38,875 owners of rural lands, while 6193 are owners of both urban and rural lands. Let us now examine the phase of the question in greater detail. To begin with, the total area of the boroughs of the colony is about 190,000 acres, while th© total area ol the colony is about 66,000,00(1 acres. The total unimproved value, as vv© have seen, is -£IOO-232,247. Of this sum the unemproved value of the rural land is .£67.288.774, leaving the unimproved value of the urban land, £32,943,473. Thus we sec that nearly one-third of the unimproved value of the freehold land of the colony attaches to laud in the boroughs, although these comprise about one 350th part of the area, of the colony as a whole 1 Surprising -as these figures are, however, they do not and cannot disclose to the full extent the great difference as between the unimproved value of town and country lands. Necessarily the official ‘.figures relate to lands within and outside boroughs, but the slightest reflection will show that there is very much land contiguous to tho boroughs, which, though technically country land, and shown as such in the Return we are considering, is none the less urban land. Could we show how much of this land there is, we would realise with even greater force that the unimproved value of land, is a much greater factor in towns than in country districts. In themselves, however, the figures are enough te show that the taxation of land-values does not mean, as ignorant critics assert it does, a peculiar burden on country land. BOOM VALUES. I have already indicated the opinion that the unimproved value has been over-estimated, and I now proceed to enlarge on this point. To begin with, let me sav that I intend not the slightest reflection on the Valuation Department. On the contrary, I regard that as one of the most valuable Departments of the Public Service. Speculative land-values exist in consequence of a system for which no public department is responsible; but I do not propose in this article to do more than make clear the reasons on which is based the conclusion that the unimproved value has been over-estimated. Close observation has convinced me that under a normal condition of things, the unimproved value should not greatly exceed one-half the capital or total value. The capital value of the freehold land to-day is 161,771,758, but instead of half that figure being comprised of unimproved value, we find that the unimproved value is set down at £1100,232,247, which leaves only .£61,539,511 for the value of improvements. Examination of Table 4 of th© Return would appear to show that it is in connection with the country land that the boom mainly exists. Here are tho figures:— County land: — Value of improvements ... £28.601,/59 Unimproved value ... ... 67,288,774 Total or capital value ... 93,890,533 Town land:— Value of improvements ... £32,937,702 Unimproved value 32.943 473 Total or capital value ... 65,881,225 It . will thus be seen that the conditions in the boroughs are what I have termed normal, since the value of improvements and the unimproved ralue balance each other. It is thus clear that the land boom at present prevailing in and about the City of Wellington is not by any means common to other centres. In the ■country districts, on the other hand, the unimproved value is more than double the value of improvements. It would be interesting to know the reasons for this wide difference as between town rao country, more especially as the value of land in the on© must necessarily bear a relation to the other. In the meantime. however, we may draw inferences from certain undeniable facts. Of course

tho value of produce has a distinct tendency to enhance laud-value©, but I think the chief factors will bo found to be the exneuuiiuie of boi rowed money on public improvement*, like the Main Trunk Railway, the advancing of money to set and the purchase of estates under th" In ud for Settlement Act. Ail these agencies combined not merely enhance the value cf land, but beget a feeling of anticipative prosperity, the result ol which is that the purchaser of land finds himself compelled to pay not merely the present value but a speculative value as well, based on tho spirit of confidence in the future which is the natural concomitant of prosperity. Tho result of this state of things is precisely the «imo as if the - landowners had agreed to form a ring or combination and had arrived at an agreement not to sell below a certain price. I question if many people have realised how strongly the purchase of land for settlement must tend to create fictitious land values. We acquired tho Flaxbourno estate for example, and pant more than £60,000 above the land-tax valuation. Tho Assessment Court, toi some inscrutable reason, saw fit to pay the owners of Forest Gate nearly £20.000 more, according to the land-tax value, than the property was worth. Now. all this is,doubtless very gratifying to the "expropriated" land-owner; but for many reason©, it must spell disaster to tlie public. - Valuers naturally pay regard to the ruling pieces in arriving at their .assessments, and hence it is certain that when an estate has heen purchased bv the State the price at which the laud" was taken must afford a pretext for "bumping up" the values of all land in the same district. Hus is a phase of the iand-ior-eettlement policy which requires to be seriously considered. Personally, I am quite satisfied that it would bo wise public policy to cease the purchase of land for settlement .at once. . . , I am far from regarding seriously tho exaggerated complaints we axe wont to hear about excessive valuations from the so-called Fanners'' Union. But an impartial survey of the facts compels tho admission that land is too dear altogether. The result will be a period of depression sooner or later, unless timely and well considered legislation be not brought to the rescue. LARGE ESTATES. The Return shows an interesting si deli..lit on the existence of large estates. In 4592 there were 262 estates of 10,000 acres and upwards, totalling .7,840,2.'2 acres—an average of 29,923 acres each. In 1906 there were 20t of such estates, and they totalled 4,704,542 acres, or an average of 23,061 acres each. Thus, as far as area is concerned, the large estates have certainly grown since 1892. Rut a verv different result igL obtained if we try the tost of value. The average value of each estate in 1892 was £55,531, whereas in 1906 it had mounted up to £60,049! We see at once that it is not a fair inference that land monopoly is abating if we regard only tho fact that the area of large estates is smaller. The true tost is value, and tried by that test* the facts show that there are more largo estates in this colony now than at any previous period of our history. If we go a few steps lower down* the scale we find that large estates are increasing both in area and value. For example, •in 1892 there were 66 estates ranging trora 5000 to 6000 acres; but in 1906 there were 78 of such estates. For the same period w© get similar results all along the line. Thus :

Adding- these classes together for each of the >years given, we find that in Mother© were 117 estates ranging from 6000 to 9000' acres; but in 1906 the number had mounted up to 158. W© see that, even tried by the area test estates ranging from 6000 to 9000 acres are actually increasing l . If we try them by the value test th© results are even more striking; but I do not propose to weary the reader with more figures. I would advise everyone who is really desirous of ascertaining the truth about our so-called "advanced ' land legislation to study the document under review. He will then realise how much talk there has been of late years about our land policy, and how little has reallv been accomplished. He will then realise that the- new Ministry have a great deal of lea-way to make up, and he will conclude that enlightens land legislation was never more necessary than at the present time.

Acree. Year. 'Number 6000 to 7000 ... 1892 ... 50 1906 ... 75 7000 to 8000 ... lc~- ... 38 1906 ... 56 8000 to 9000 ... 1892 ... 29 1906 ... 27