WHO IS LIABLE ?

Te Awamutu Courier, Volume 55, Issue 3929, 21 July 1937, Page 8

WHO IS LIABLE ?

LAND TAX PAYMENTS. LESSEES AND TENANTS. “INTENTION OBSCURE.” “ The liability of lessees and tenants to pay land tax has been exercreing the minds of taxpayers ever since the passing of the Land and Income Tax Amendment Act of last session,” was the comment of an Auckland barrister who specialises in taxation questions. “The Labour Government has re-enacted a section of the principal Act of 1923, which was repealed in 1931. “ Under the former Government the clause interpreted to apply to registered leases only, but with the growth of business concerns owning leasehold property throughout New Zealand it became apparent that the law inflicted a great hardship on concerns such as chain stores and theatres established between 1925 and 1931. “ For example, a company with its headquarters in Auckland, and owning a freehold, held leasehold premises in ten other cities and towns. The freehold of each of the properties leased by the company was owned by separate individuals, and each was subject to a mortgage of approximately £3OOO. The result was that the unimproved value of the whole of the leasehold and freehold was assessed against the land company, which placed it on the maximum grade for graduated land tax amounting to 6d in the £ on the unimproved value. “ The owners of the properties that were leased to the company were not liable for taxation as they were exempted on account of the mortgages on the land. This exemption, however, did not operate in respect to the lessee. The position was anomalous because although in theory the lessee was entitled to a deduction of the amount of tax payable by the landlord no such deduction was available on account of the landlord being exempt on account of his mortgages. RENTED HOUSES. “ The hardship involved by the clause was recognised by the Government, and the section was repealed. The Labour Government has now reenacted the provision, and judging by a Gisborne case it appears that the Commissioner of Taxes (intends to rule that every tenant, whether he has a registered lease or not, comes within the scope of the section. If the contention is sound the tenant of a rented house may find himself liable to pay land tax on the value of the property he rents. The intention of the Legislature is obscure, but I do not think that it meant to include such cases, but the Commissioner of Taxes may nevertheless have sound grounds for his proposals.” OFFICE LEASES. Mr Wi. R. Fee, president of Auckland Chamber of Commerce, said the re-introduced section of the Land and Income Tax Act was interpreted by the Commissioner of Taxes as follows: “ Every person who is lawfully in possession of any land under any form of tenancy is deemed to be the owner and is liable for income tax accordingly.” It appeared that the Commissioner even included weekly tenancies. “ I cannot believe the Legislature intended the amendment to be so farreaching,” he said. Under the Commissnoner’s interpretation tenants of offices in public buildings would be liable for the tax, although the rooms occupied on various floors were over the same piece of land. There did not seem to be a method of equitably apportioning the liability amongst the tenants. The Act was unworkable in this connection. If the Commissioner’s interpretation were the correct one then the amount of extra revenue that would be collected by the Department would be enormous. Mr Fee said a sub-clause appeared to give exemption to a tenant for land tax paid by the owner of the property, but jin actual practice it did not work out that way, as the Commissioner, by his assessment, interpreted the Act in a manner that gave little relief to the tenant.