W. GOW.]

87

8.—5

brought the land to the condition in which it stands to-day ; and in both cases, although it is not a true assumption, it may be assumed that the cost is the same. Personally, I know perfectly well that a man cannot bring land into the. condition it is in to-day and make money out of it at the price he can sell it at unless the question of unearned increment comes into play. But that, I think, would be a fair basis for the taxation of land. That being a basis for the taxation of land, 1 think it is a very unwise policy to value land upon its speculative value. New Zealand, particularly the North Island, I think, has suffered enormously by this land speculation. Land is not worth the money which people are paying for it or which people have paid for it in many cases. It woulel be impossible to make anything out of it at the prices which people pay for it sometimes, or have paid. Ido not know what the condition may be now, but I am speaking of what was the condition a year or two ago ; and 1 think, therefore, that the valuers should be capable men and ought to value the land strictly upion the basis of what that land will produce in. the: way of income. That cannot be> absolutely accurate. There will, no doubt, be errors and injustices here and there, but in the main I think a fair accuracy might be;-attained by valuing land on the basis of what it will produce ; and that valuation, of course, would vary from time to time according to the value of the produce of the land. It would vary also in accordance with the situation of the land- whether it was close to a market or far from a market, and so on. 1 think that if that course, were adopted we would ge:t to a much fairer basis on which to assess tax upon land than the present one. As between land-tax and income-tax, I have said that the true estimate of a man's ability is the amount of his yearly income ; but some men who are, of a speculative; turn of mind may sink their money indefinitely, with a view to getting later on the unearned increment, and land may be held up in that way, producing practically nothing or very little, in the hope that twenty or thirty years hence it may be disposed of at a profit which will be, sufficient to cover the idleness of the intervening years. And that is erne' of the reasons for the existence of a land-tax, not for the purpose of breaking up the estate, but to make these people pay tax as if they were using that land properly. It may be said that there is danger of double taxation. The man who is using his land properly and paying income-tax shoulel not be called upon to pay a land-tax as well. That is perfectly true, and if my theory were carried out he woulel not be called upon to pay land-tax, because I would deal with that, by simply assessing the land-tax, making it the primary tax to be paid. I would assess the income-tax in due time, and from the amount of the income-tax deduct the amount paid in land-tax, letting the man pay income-tax simply upon the, difference. The Chairman.] I can see how that would be perfectly fair in the case eif a man having land which ho used in connection with a business ; but suppose tho case of a man whei has land, part eif which only he used in connection with his business, would you then deduct the whole of the land-tax from his income-tax in that case ? —Why not ? He might be deriving income from the land which he was not making from his business ?—Very well; he has got to return that income. You would tax him on his rents ? —One difficulty in studying this question lies in the fact that practically none of the authorities of any consequence deal with land-taxation as we have it in this country. Th'cy deal with taxation of the rents of lands. Of course, that is consequent upon the eliffercnt tenure which exists in other countries. But it is quite clear that if a man is paying a privilege tax he should not on the same source of income pay the income-tax. The privilege tax woulel never, I take it, reach the amount of the income-tax on a well-worked place. With regard to the 5 per cent, deduction to which Mr. Clark referred and which was in operation here up till a year or so ago, it is epuite clear that for some people it represented an improvement as compared with the former position. To others it represented a loss. That is to say, 5 per cent, was too much of an allowance in some cases and too little, in others; but it was a very fair attempt to meet the difficulty I have spoken of. It was assumed that land would produce a net income of 5 per cent., and that amount was allowed to people when they were paying their income-tax—s per cent, of the value of the lanel was alloweel to them. But on the plan which I advocate there would be no need to do anything of the kind, because a man would simply, from the amount which he was due to pay as income-tax, deduct the amount he had already paiel as land-tax. Of course, a good deal of what lam saying would be subject to modification by reason of practical conelitions, which I am not dealing with at present. lam rather theorizing upon principles. But I think that that would bo a fair solution of the question. The tax would be a flat tax. There would be; no graduation so far as land is concerned. I believe in graduation so-far as income:-tax is concerned, provided that you keep in mind the fact that you may kill the geieiso that lays the golden egg by overdeiing it. I think every one will admit that we: were in some danger of doing that in. New Zealand. Mr. Clark : We were very close. Witness : We came: very close to it, anyheiw. Ido not know that I need say much mere in that connection. Shortly, it means this : the main basis of our taxation—leaving out eif the question death duties and so on —should be a man's income. If a man holds privileges such as the possession of land, which he may hold to the detriment of the community and to his eventual profit, then year by year he should be taxed upon that; but he should not be taxed both upon the privileges conferred by the piossession of property and the income of that same property. Hence the. amount which he pays as tax upon his privilege should bo deducted from the amount which he pays as tax upon his income. Mr. Shirtcliffe.] You suggest that land-tax should not be imposed for breaking up large estates. Of course, we: kneiw that that was the original intention of the Act ?—I think it was a mistake. And probably it has achieved its obje:ct to a very large extent ? —1 flei not know that it has. There are comparatively few large estates now as compared with the position twenty or twentyfive years ago ; but there is still the question of the possible reaggregation of large blocks of lanel' Have you any means in your mind to deal with that ? —I would not worry about that,