The Wanganui Chronicle. MONDAY, DECEMBER 4 1950 THE LAND PROBLEM

Wanganui Chronicle, 4 December 1950, Page 4

The Wanganui Chronicle. MONDAY, DECEMBER 4 1950 THE LAND PROBLEM

QF the 66,000,000 acres which comprise New Zealand’s surface soils 21,000,000 acres are classed as good, 24,000,000 as indifferent, and 21,000,000 are written off as hopelessly uneconomic. The Minister for Agriculture accepts this classification of the surface soils so it can be regarded as representing the best opinion available today after appropriate investigation has been made. The three categories merge into each other. Some of the land which is regarded as good today when high prices are obtainable would have to be, placed in the second class when prices and more particularly when profit margins recede. Some indifferent land today could easily slip into the hopelessly uneconomic class. The dividing lines are ever changing their position. One of the great conveniences of a stable price level is that for farm produce land utilisation can be pursued with some degree of persistence. When prices received by the farmer go up the area of land which is profitably usable expands, but when costs follow prices the area, suffers a contraction. The major problem of New Zealand lies in expanding the utilisation of the middle classification of land.

Up to the present time the good lands have made the greater contribution to New Zealand’s primary production and it is clear enough that the full extent of production from the existing good lands has not yet been achieved. Much more could be produced from the same acreage. But if more is to be obtained then more labour will have to be made available, for no matter how many machines are put on the land they cannot run themselves. Men must be found to work the machines. Up to the present the efforts made by the farming industry to secure and to retain its own labour force have been inadequate. There are many reasons for this, but it should be regarded as a central problem of the farming industry to secure and to retain its own labour force. This cannot be done by making farm work seasonal. Further, the problem of rural isolation must be broken down and the desirability of establishing village communities in the country will have to be considered. This has not been possible because in the main the ■village could not grow up through lack of numbers of persons on the soil. The rural labour problem is as much a social problem as a business or an economic one and until the social side of rural life for wage earners is given much more attention that it has as yet received the problem of attacking the land with a view to increasing production is likely to make tardy progress.

Before the farminjfindustry can expand its activities in the social field, is first necessary that the industry itself shall stand on firm ground and be able to expand through being possessed of increasing amounts of capital. Secondary land being less productive per acre than first class land requires to be farmed in large blocks, fencing and fertiliser costs must necessarily be high in relation to the value of ultimate production, and the ability of the land to stage natural regeneration must not be impaired by overstocking. The farming of second class land, therefore, is a large capital-investment proposition. There are few men of large capital resources plus the inclination and the ability to farm second-class land who are available for this class of enterprise and owing to the present method of Government finance this class is likely to die out because the risks involved have become too heavily loaded against the farmer. Today it is a grim joke that many farmers are afraid to die because the complete liquidation of their farming operations would be an inevitable result of the tax burden placed upon their estates. To take an illustration which is founded on an actual case. An estate of a deceased farmer totalled £lOO,OOO of which £31.000 was in liquid assets, that is assets whieh could be easily realised and thus become the proceeds which would be available for the payment of death duties. The land, furniture and implements were valued at £34,500 and the live stock of 14,000 sheep and 1000 cattle at date of death at £34,500. Income tax payable but not due at the time of death totalled £9,000, but income tax payable for the period affected of the year in whieh death occurred totalled £19,000. Income tax payment due from the deceased’s estate therefore totalled £28,000 which just about absorbed the whole of the liquid assets. The estate was deprived of the whole of its liquid assets, but that is not the whole of the story. Death duties had yet to be paid and these were provisionally assessed at £37,000. This sura must perforce be borrowed. Where is the institution which, is likely to lend £37,000 on a £69,000 estate with the object of liquidating a debt? Where the personal factor of management enters so largely into the problem and where inefficient management could pile up losses at a speedy rate it is obviously unreasonable to expect that the trustees of such an estate could borrow on a satisfactory basis from outside sources. Should the farming operations cease for any length of time then second class country would soon revert to second growth and the land’s productive capacity be seriously impaired and perhaps lost altogether, to be recovered eventually only by the expenditure of large sums of

money. But, i‘ will be asked, why should the estate pay only £9,000 on a full ; tr’s operations and pay £19,000 for a part of a year’s operations in the year in which the death occurred of the owner. On its face it. is incongruous. The high assessment for the year of death has been brought about by taking the stock into account at standard values with sheep, say, at 30s. a head and the Taxation Department assuming that at the time of death the difference between the standard value and the current sale value had been realised as a profit. Should the estate be wound up and all the assets sold then there may be grounds for taking the amount realised above standard values into account for income-tax purposes on death. But where the trustees of the estate continue the farming operations there will be no realisation of the customary stock carried on the farm and the farm which as a going concern comprises land, implements, improvements and stock-will continue as a producing unit. In order to continue as a productive unit the standard or customary stock will have to be sustained. .While these normal operations continue there can be no profit realised <S.i the standard stock. For the Taxation Department to assume as it now does that such a profit has been made to the extent of £3 10s. a head of sheep is to build up a fictitious claim upon the estate which fictitious claim is presented in the enlarged income-tax demand in the year of death. In times like the prerent when .selling prices of sheep are exceptionally high this claim to a fictitious or non existent profit must result in the complete breakdown of the whole estate save in those instances where the estate is very fortunately placed or the beneficiaries are in a position to meet such excessive demands from out of their private resources. If it is the intention of the Government to do equity then it must immediately abolish this excessive burden ot taxation, upon estates which excessive burden is the result of the assumption of profits being made over standard values. Even if equity is to be laid aside in these instances it would still be desirable to abolish the fictitious claim based on a fiction if an expansion of soil utilisation is to remain the policy of this Dominion.