A. FELS.]

83

8.—5.

Then at the end of the year you ascertain your profit—l hope it is always good—and then you divide that in certain proportions with the Government ? —Quite so. In your statement you instance the casa of two leasehold properties —one in Dunedin and one in Wellington —in respect of which you pay land-tax many times greater than does the owner. In those cases have you long leases of the properties ?—Tho Dunedin lease is a fairly long one. Is it fifty years ? —No, not so long as that. Mr. Clark: May I explain ? The length of the lease would have.no bearing on that question that Mr. Fels raises. He would still pay despite the fact that he had even a year's lease;. Mr. Shirtcliffe : Would the length of the lease not affect the lessee's interest ? Mr. Clark: The lessee's interest does not enter into this computation. Mr. Fels is referring to section 52 of the Act. It is treated as his land for the jrurpose of assessment, and the company's land is aggregated with this leasehold. The unimproved value is treateel as the, company's freehold, and then credit is given in the assessment for the amount of tax paid by the freeholder. Mr. Shirtcliffe: How is tho proportion of tax paid by the freeholder arrived at ? Mr. Clark: We take the amount that he actually pays, the amount that the freeholder is actually assessed with. Mr. Weston: It is to prevent evasion, is it not ? Mr. Clark : Yes, to prevent evasion. The owner of that freehold that is leased by the company may own no other land, and he pays his land-tax at the rate fixed by the unimproved value of that property alone. The company owns land in other centres, and it leases land, and the whole of these: lands are aggregated together, and the rate of land-tax is fixed according tei the total arrived at by the aggregation. That accounts for tho larger amount that is paid by the company than that paid by the owner. Mr. Weston: Does that account for the lessee's tax being six times as much ? Mr. Clark: Yes. Mr. Weston (to witness).] Let me put it in this way : when you lease these: properties you lease them with the knowledge that you have to pay this taxation ? —Quite so. Mr. Clark : Not always. There is one case there which is a matter of dispute—the case referred to in which the company leases part of the ground floor of the building. Witness : You are quite right. Mr. Shirtcliffe (to witness).] You do lease these properties with the knowledge that you have got to pay heavy taxation ? —lt is this way : if we went in for a lease at present we certainly would go in with that knowledge, but we hold some leases which commenced many years prior to the Finance Act of 1917 being passed. The Chairman.] This provision that bears so heavily upon you was first introduced in 1.917, was it not ?—Yes. Mr. Shirtcliffe.] Still, if you were leasing property to-day, in considering the rental that you paid you would calculate that you had so-much taxation to pay ? —We must necessarily. And you would take the risk of that taxation being either increased or reduced later on ? — Quite so. When you took up these leases you did not anticipate that the, tax would be increased in consequence of the war to such an extent as it has ?—No. But you had that risk in view ? —We were not quite sure in regarel to this Wellington lease, because we were under a misapprehension there, as Mr. Clark has just mentioned. We have had some correspondence on the matter. We were under the impression that this section of the Act applied to leases of land and buildings, but not to the lease eif part of a building. I do not want to discuss the matter strictly from your own personal standpoint or from your firm's standpoint, but on the principle of the thing. Speaking generally, when lessees take up a lease: they take into account the tax that they will be called upon to pay ?—lf they know the law they will do so. It is their business to know the law ? —Quite so. lam sure that many who take up a lease are not aware of that section. You would not take up a property unless you thought you could make it pay ? —That is so. You suggest, do you not, that the land-tax should be abolished ? —Yes. Entirely ? —Yes. And would you make the income-tax universal, applying to town and country ? —That is really outside my province. What would you put in its place, because money has to be raised ? —1 quite realize that. As I stated in my statement, the total land-tax last year amounted to less than £1,500,000, and that is a comparatively small item in the, Budget. Still, that £1,500,000 of money has to be found somewhere else if the land-tax is abolished ?— A remedy would certainly be to make income-tax universal. I think that would probably account for a great deal of this land-tax. Do you see any difficulty in differentiating between rural lands and city properties as regards land-tax ? —No, I cannot see that myself, because town properties are necessarily situated in town areas and are used either for the, purpose of business or for private dwellings. That is a very different thing from rural property, which is used for the production of produce. The graduated land-tax originally was intended to burst up large estates and is now intended to prevent reaggregation ?—Yes. If your suggestion were carried out anel there was a differentiation made between rural lands and town lands by which the graduated tax would not apply to town lands, might that not possibly lead to a great deal of speculation in town lands, not for bone fide business purposes, but for speculative purposes ? —There is that danger certainly, that it might lead to such speculation, but I do not think it would be a very important factor.