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41. Other Privileges. —Other privileges which were operative in State forests at the end of the year were 21 sawmill-site leases, 69 tramway and road licences, 35 housing-site leases, and 15 miscellaneous privileges. 42. Water Conservation. —The Forest Service is very conscious of its i esponsibilities towards urban areas in respect of water conservation, and precautions are taken to protect catchment areas under its control and to safeguard them against pollution. 43. Nassella Tussock Control Reserves. —A nassella tussock control reserve at Omihi in Canterbury, which is administered by the Forest Service as if it were State forest land, as explained in last year's report, was planted in trees, and despite a long period of dry weather a good strike was obtained. The Forest Service's reservations regarding the effectiveness of tree-planting as a control measure were mentioned in last year's report. CHAPTER IV—PUBLIC AND PRIVATE FORESTRY General 1. The most significant events in public and private forestry during the year were the amendments to land and income tax law to give some relief to farmers planting trees, and the agreement reached with the Commissioner of Taxes regarding the workingexpenses of afforestation companies. Other important advances in the development of public and private forestry have still to be made. Only a few of the private, local-body, and company forests in New Zealand are under technical management, so the need is great for the dissemination of technical advice and other assistance in forestry work. In addition, in the interests of the best utilization of the Dominion's land resources, there must be an active encouragement of the forestry use of land unsuitable for farming, waste portions of local-body reserves, and elsewhere ; but, unfortunately, staffing difficulties have prevented the Forest Service from establishing during the year, as had been intended, a Division of Public and Private Forestry. 2. The compilation of an inventory of private exotic forests, started some years ago, is being pursued as staffing permits ; this information is required in planning to meet local timber requirements of each district. Forest Taxation 3. General.—Since the establishment of exotic forests first began in earnest nearly thirty years ago, there has been a growing conviction in the minds of those closely connected with New Zealand forestry, that the general tax system was ill adapted to deal with the peculiar needs of forestry, and that significant changes were necessary if private forestry was to function economically. In 1947 and 1948 the Service's forest economist, who received an ex-serviceman's grant from the Rehabilitation Department, carried out an investigation of forest taxation in selected European countries to provide a basis for a general review of New Zealand tax practice in its application to forest property and forestry operations. In April of last year a report was submitted to the Government giving details of the European tax system studied, and setting out the alterations necessary to secure an equitable incidence of taxation on forestry in this country. This report is to be published, and it is expected that the printing will be finished by July, 1950. 4. Taxation of Farm Forestry.—Several important amendments of tax law have already been effected by statute, and it is expected that others will be dealt with in the 1950 session of Parliament. Sections 6 and 7of the Land and Income Tax Amendment Act, 1949, remove two obstacles which hitherto have impeded attempts to encourage an interest in farm forestry. Farmers have been reluctant to expend money on the establishment of wood-lots because deduction of the expenditure from farm income for tax purposes has been disallowed ; the ruling of the taxation authorities was that such

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