“A PENAL TAX”

Te Awamutu Courier, Volume 53, Issue 3795, 14 August 1936, Page 7

“A PENAL TAX”

GRADUATED LAND LEVY. FINDINGS OF EXPERTS. The Minister of Finance, in his Budget statement, says, with regard to the proposed graduated land tax, that “the procedure will mean the minimum taxation on the working farms:, and home-owner, with increasing rates on abnormally large holdings and other areas held in many cases for sneculative profit instead of for use in production” (says a statement bv the Associated Chambers of Commerce of New Zealand). The propriety of imposing taxes on a penal basis for the purpose of encouraging the submission of rural area.,, suitable for small farms, which may be at present farmed in a manner which does not result in the maximum possible production, is not questioned. It is, however, extremely doubtful whether there are many large holdings left in the Dominion which would show markedly improved results if sub-divided. The majority of the areas are large, back-country areas, of poor carrying capacity, which must be farmed in large areas or not at all. The Taxation Commission of 1921 States: —“The graduated land-tax was orioinally designed to break up large estates. There is no evidence to show that it is required any longer for this purpose, and there was much evidence showing that it is now preventing the development of large areas of land requiring a considerable amount of capital expenditure to break in.” TAX ON URBAN LANDS. The Minister proposes to make the graduated land tax applicable to urban as well as to rural properties. Whether or not there is any soundness in, or justification for, levelling the gnaduated land tax at the aggregation of rural properties, there is no sort of aggregation as regards urban lands which are used for commercial purposes—except the aggregation for taxation purposes, which will be made by the Government, of different blanch properties of one business concern, trading in different centres. Yet, if past experience is an” guide, the burden of the land tax will fall upon urban rather than rural property. Professor Condliffe, in his book “New Zealand in the Making,” gives the following table of land tax returns for 1926-27, which shows how the land tax falls heavily on city properties as regard the flax assessed per £lOO of unimproved value:— s d Farming and allied pursuits 8 6 Professional 6 7 Manufacturing and industrial 10 5 Commerce and trade 14 6 Banking . 52 5 Transportation _ , 8 3 Miscellaneous and unspecified ... 9 8 The same writer says that the soundness of the tax (in earliei- days) was much more open to question in a time of heavy income taxation. “A SERIOUS HANDICAP.” That position obtains to-day, and the graduated land tax, coming as it does on top of heavily Increased income tax on companies, increased wages and shorter working hours, is likely to cripple industry. The progressive taxation of unimproved values on city properties is truly a penal tax, because it is additional to income tax paid also at progressive rates. Furthermore, a much greater proportion of city lands pays at a higher scale 'than farming lands. The Taxation Commission o-f 1924 stated further:—“Land tax, including graduated land tax, should as soon as possible be abolished. The graduated land tax as applied to business nremises is a serious handicap to trade and industrial enterprise, and serves no good purpose. We received a great deal of evidence for and avainst land tax. The weight of evidence was against both land tax and graduated land tax, and in favour of abandoning both and substituting the graduated income tax.” Numbers of cases could be quoted of the very serious increases in tax payments which will be brought about by the graduated land tax, ranging up to 600 per cent. These rates are a fixed and exact quantity, whereas “community-created value” is an intangible thing—often created by individual and personal labour any computation or assessment of which must be purely arbitrary.