The Wanganui Chronicle WEDNESDAY, NOVEMBER 25, 1931. GRADUATED LAND TAX

Wanganui Chronicle, Volume 74, Issue 279, 25 November 1931, Page 6

The Wanganui Chronicle WEDNESDAY, NOVEMBER 25, 1931. GRADUATED LAND TAX

THERE is mueh misapprehension concerning the abolition of the graduated land tax, and this misapprehension is being fed by those who oppose the present Coalition Government. The Socialists and the Independents seem to have deliberately joined forces to represent the abolition of the graduated land tax as a present to the large landed interests. Tn so doing they may gain some support because the graduated land tax was brought into being with the avowed object of breaking up the big estates. The real effect of the graduated land tax in this direction has, however, been misjudged. The cause of the break-up of the large estates has been more brought about by economic forces than by the weight of the tax. The economic forces have provided an inducement to the owners to break up the large holdings, but the pressure of the tax has compelled few to throw their lands on the market. There have certainly been few estates broken up by the weight of the tax in recent years. The first measure of land legislation was passed in the year 1891 when large tracts of the Canterbury plains were held by English land companies. These companies were, in the main, too poor to improve their holdings, but not poor enough to he forced into liquidation: the result was that the land was held against the prospect of rising prices to the detriment of the Dominion as a whole. Land values in New Zealand started to move upwards soon after 1891, chiefly through the introduction of refrigerated shipping space, which increased the Dominion’s export facilities; the subsequent development of the dairying industry carried the expansion of exports and the increase in land values a step further. The scarcity of foodstuffs in the world, occasioned by the war period, took New Zealand land values to peak prices. When wool was practically the only exportable product large areas of land were desirable, but when frozen beef, mutton and lamb were added, farmers found that they could utilise smaller areas to greater advantage to themselves and, when dairy farming became a possibility, the process of the sub-division of land holdings naturally went a step further because it paid the farmer to farm more intensively fewer acres of land.

During the period of rising prices the graduated land tax bore lightly upon the landowners, and as Government valuations were generally twenty per cent, below the current value of the land the land tax was not an onerous burden at all. It was hardly noticed and so it never forced land on to the market. The tax was regarded by the Treasury as a staple source of income which it was desirable not to disturb. But such an opinion had to be reconsidered when a period of drastic reductions in prices was ushered in. Professor J. B. Condliffe, in his excellent survey of the Dominion’s economic and social development, entitled “New Zealand in the Making” (Allen and Unwin) states that, despite evasions and avoidance “the facts do not detract from the soundness of the New Zealand tax at the time and, under the circumstances of its imposition. They characterise it as a soundly conceived element in the tax system, admirably adapted to give further impetus to constructive forces already at work. Its effect has undoubtedly been exaggerated, both by its supporters and by its opponents. Its soundness, as subsequent discussions will show, is much more open to question in a time of falling prices and a time, moreover, of heavy income taxation. . . It should be regarded as a measure designed to meet existing conditions at a particular time. As such it was successful, if somewhat unimportant. It fitted into the economic trend of the day and played a minor part in encouraging closer settlement and breaking up the large Lind holdings.” In 1924 the Royal Commission on Taxation arrived at the conclusion that “the graduated land tax was originally 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.” Here are two reliable and impartial authorities proclaiming the graduated land tax to be now unimportant in their original purpose and retarding the very object for which they were imposed.

The Minister of Finance had to keep in mind two main objectives when he fashioned his Supplementary Budget; the first was the provision of the necessary revenue, and the second was to see that any action which he took in the furtherance of that end would not hamper production and employment. To shift the tax from the land and place it upon the income derived from the use of that land was, therefore, sound economy, and those who oppose it are opposing a forward step to meet the new conditions which now exist in the Dominion of New Zealand.