13.—5.

114

|g. w. leadley

Mr. Clark.] That was when you were assessed for £1,000 ? —Yes. After including the deductions to which I was entitled the amount of tax which I had to pay was £20. Mr. Clark.] There must have been something unsatisfactory in the return ?—There was nothingsaid about the return. Mr. Weston : Mr. Clark, you could easily have that case turned up. Mr. Clark: Yes. Witness: Finally, 1 want to say that the small farmers in our district strongly urge that the taxation on mortgages shoulel be reduced, or some other method devised to divide it, between the mortgagee and the Landowner, and that the income-tax should not be reimposed. Willtam Henry Nioholson examined. The' Chairman.] You are the secretary of the Sheepowners' Federation, Mr. Nicholson ? - Yes, and I may say for your information that 1 have; had thirty years' experiene:e in our high country. As a, sheep-farmer ? —Yes. I was managing a large property for over twenty years. You have prepared a, statement showing the views of the Sheepowners' Federation in regarel to taxatiem matters ? —Yes. Will you read your statement to us ? —Yes. I may say that it is somewhat on the lines of that which I previously prepared anel placed befere the Taxation Committe-.e of 1922, but this statement has been brought up to elate as far as possible, though the same arguments apply now. My statement is as follows :— I beg tei place before you the views of the Executive of the New Zealand Sheepowners' Federation with reference to the present system eif taxation as it affects the man who has his capita] invented in lanel for the; purposes of primary production. The effect of the land-tax as at present levied is that capital invested in land is the only capital which is forced to pay taxation towards the: cost of government irrespective, of whether an income is earned from the land in whie:h that capital is invested or not. Under the present system of land-taxation the Government have, in effect, taken a compulsory first mortgage over the land at so-much per cent, interest, and at' each increase in valuation the percentage of tax on the primary product produced from that land as a result of the manual labour of the producer is increased in proportion. The result of this continued appreciation of unimproved values has resulted in the land-tax becoming in many cases a burden far too heavy for the land to bear uneler orelinary circumstances as regareis the prices realized for the products therefrom. An additional burden has to be borne by the land owing to the necessity of paying a higher rate eif mortgage interest than would be the case if the mortgagee was not also required to pay taxation by way of income-tax on the interest he received from the man on the land: This means that the land must earn not only the interest on the mortgage, but also the income-tax paid on the amount received by the mortgagee from the farmer. The costs of production, including taxation, have increased to such an extent in recent years as to overrun the interest-earning capacity of the land, and had not the present phenomenal prices for wool been received by the shcepowner he could not possibly have carried on operations successfully under the present system and under ordinary marketing-conditions. It must be remembered that when it is stated that land-tax is also paiel by companies and town interests that the amount of capital on which land-tax is piaid in each individual case in proportion to the total capital involved is comparatively small. For instance, a farmer would invest up to 80 per cent, of the total of his capital in the land on which he weiuld be: required to pay land-tax, the other 20 per cent, representing stock and improvements, whereas in the case of the factory the value of the amount would be in an inverse ratio to the total of the capital represented in the assets of the town firm or factory, the bulk being absorbed in the stock and plant. It will readily be: conceded that as between the two investments of capital that the individual landowner is placed at a distinct disaelvantage as compared with the investor in company shares, &c. If the same: principle as that involved in the land-tax were applied to all forms of capital anil property, which, after all, is a form of capital, then my executive feel that the burden would be distributed more evenly and fairly than is the case at present. Failing the application erf this principle to all capital however invested, my executive woulel suggest that all incomes, however deriveei, should pay taxation on an equal footing with graduations if advisable. This would elo away with the possibility of the farmer being called upon to provide not emly interest on his mortgages, but also income-tax on the: interest paid by him, and during those seasons when, through possibly no fault, of his own, the farmer had to face: a loss in his operations, of his being called upon to add still further to his losses by paying out a slice, from his caprftal to .the Government in land-tax. The present incidence will not stand the test of continued depression on the world's markets or lowered prices for primary products, as was amply demonstrated during the slump period. As showing the almost, impossible: task set the sheepowner to-day, who has to meet interest charges, production costs, and taxation, the: following calculations may be of interest. Take the case of a man with a sheep-run the unimproved value of which is £100,000, the, improved value: £120,000, as assessed by the Government valuers. The owner purchasing at the Geivernment improved value;, £120,000, pays down £60,000 of his own capital, leaving £60,000 on mortgage, After purchase he has to provide stock and plant, which on a place erf this size it would be fair to put down at £20,000 additional. The position, then, is this, from a capital cost viewpoint only, at, say, 5 (unimproved value £100,000. purchase price, at Geivernment valuation £120,000) : — £ s. el. £ s. d. Owner's capital paiel clown .. .. .. .. 60,000 0 oat 5 per cent. 3,000 0 0 First mortgage, hold by Government represented by landtax on unimproved value —viz., £2,479 3s. 4d,, capitalized at 5 per cent. .. .. .. .-. 49,583 6 Bat 5 percent. 2.479 3 4 Mortgage held by mortgagee erroneously called first mortgage but which is in reality a second mortgage on account of purchase-money unpaid .. .. 60,000 0 oat 5 per cent. 3,000 0 0 Additional capital required for stock and plant .. 20,000 0 oat 5 per cent. 1,000,0 0 ■ £9,479~3~~"i