GRADUATED LAND TAX.

Dominion, Volume 5, Issue 1532, 30 August 1912, Page 6

GRADUATED LAND TAX.

THE AMENDING BILL. SECOND HEADING DEBATE. The Hon. JAMES ALT-EN (Minister for Finance) moved tho second rending.nt' the Land nml Income Assessment Amendment Hill. There had already been some, discussion on the Bill that, nfteniooli. It had been suggested that the Bill should bo referred direct to the Public Accounts Committee before the. second reading debate. He was glnd that the House, had adopted his suggestion that the Bill ought to be considered by the Houso first, and then referred to the Committee. It would be impossible for the Government to allow the Committee to consider or amend, some portions of tho Bill, for ineliided in it. was one of the most important planks of the Government's policy in regard to taxation as a means of inducing those holding largo areas of land, to cut them up for closer settlement. Although members on the other sido of tho House had said that there was no real increase of taxation, it would l>o found that thero was a much larger iiiM'cas! than would have been imposed had there not been a change of Government. In 1S!)2 there had been six estates of over 130,000 acres; to-day thero was not one. Tn 1592 there were four estates between 100,(100 and 150,000 acresj to-day (here was not one. In 1592 there were <>ix ostalos between 75,000 acres and 100,000 nerss; to-day Ihevc "ere only two. So. lie aidit auote other ca.«s showing

Hint large estates were reducing iu number. In (lie course of the next fifteen years the process which had been (joins; 011 would undoubtedly be accelerated because the graduated land tnx was goinn to bo. increased. Ho did not think that anyone could seriously arguo that the system which the Government proposed to amend was an equitable system. In criticising tho proposal some members had picked out special capes in the steps of (lie old system, and compared tho taxation with that under the proposed scale. They had then staled (hat the inerea.so was only small; but why had they not picked out. items in the top and showed that tho increase was greater. In the new scheme all increases were reeular and gradual, except in two instances. They had adopted regular graduation, in order that the scale would be fairer and more equitable than before, when an increase of .£1 in value might mean an increase of a large sum in taxation. There would bo a considerable increase in taxation following this Bill, and it must accelerate the cutting up of estates. He did not think a man could hold an estate of over ,5200,0G0 in unimproved value, "and pay ,£6OOO a year in taxation. The Bill would bring under the operatio.n of the 25 per cent, additional tax, 17-1 estates, all of them in the country. Ho repented that there wcro two principles involved in the Bill —the alteration of graduation from the unfair step system to the regular system of gradual iiicrea.se; and the application of the 2.") per cent, extra tax to estates of -£10,000 and upwards in value, instead of .£40,000 and upwards, as formerly. The Provisions Explained. Explaining the provisions cf tho Bill, Mr. Allen said that one of the main Alterations was that with Tospsct to the definition of agent and respecting'manufacturers in England. Up till two years ago a manufacturer iu England paid taxes on business done in New Zealand; but two years ago it had been discovered that, owing to a dpfect iu the law, the tax could not be collected. Tho proposal was lo remedy that defect by amending the law so that a manufacturer in ■i , ;ii'*land, who was operating i'ii New Zealand through an agent, should pay taxation on the profits of business done in New Zealand. There was no intention to impose taxation upon, business ilono in England; but, where a roan was using an agent in New Zealand for the.purposes of his business, and through that agent he disposed of goods in New Zealand, he rendered himself liable to taxation. Respecting mortgages, tho amendment was to alter tho term "capital value," and to say that the mortgage shall bo taxed up to the full.actual valiio of tho security. Referring to the special exception up to .£3500 in favour i of a widow with chililren, he said that he was sure honourable members could.not possibly oppose this liberal proposal. Mr. Wilford: I wonder you didn't make it .£SOOO. Mr. Allen: "The honourable gentleman may bo surprised. Uu ,will go to any lengths just now." Respecting the provision to include tho income of a married woman in the huband's income for purposes of taxation, Mr. Allen said lie had been informed that there had boon cases in which husband and wife had cut up their incomes in order to escape taxation. In conclusion, he said he hoped the Bill would be allowed to pass without too much delay, because ho was anxious that the State should have the extra revenue which the Bill would provide as soon as possible. MEMBER FOR AWARUA. HE SUGGESTS DANGERS. Sir JOSEPH WARD (Awania) eaid that 'with' the most important proposals of the Bill—the graduated land tax, and the change to smaller gradations—he was in entire accord. Hn had actually had under consideration the latter proposal, and he had intended to introduce it. Ho approved also of the reduction of tho limit from ..£IO,OOO to ,£30,000. But itmust bo read in conjunction with tho proposal outlined in the Budget to have tho method of assessment for land taxation modified with the object of having proper allowances made for improvements. The effect of the legislation on the Statute Book now was intended to bo to leave improvements free from taxation. Government members: They're not. They never ".re. Sir Joseph Ward went on to orgue that with the proposed revaluation on a now basis, and the new graduated tax,., tho State would be bound to have less revenue under the system than it was receiving now. The Hon.. Mr. Fraser: Not necessarily. Sir Joseph Ward said ho was certain that instead of there being an increase of taxation there would be a decrease. Practically all sections of the community wero in agreement that the holding of large landed estates by individuals was not in the interest of progress. What was necessary, then, was a tax wh'ich would be effective to secure-subdivision of, these largo estates, but he was satisfied that before such a tax was to become operative a reasonable period of years ought to tye allowed to landowners as a timo of grace within which they would have the opportunity of cutting up their . holdings. How Much? It had taken the Government the best part of 22 years in this country to purchase worth of land, and to settle 3500 souls on it. And there had never been a time while he was in office when there was not more land on offer than the Government could buy. Tho Leader of tho Government had said that he had under offer to tho Government 500,000 acres of land. How much of this did he think ho could buy? Mr. Massey: I'll tell you that at tho end of tho year. Sir Joseph Ward said the cost would be about six millions sterling. Where was the .money to come from? ■ Mr. Wilson: The Treasury is full. Sir Joseph Ward said the Prime Minister hoped to get 'the money from the sale to leaseholders of their freehold. But where would tho tenants get the money? Thev must borrow. And the inevitable result of the Government purchase system had been to raise lasid values to such a height that men went on to the land with millstones round their necks. The result of the freehold purchase in quantity would be a depreciation in tho value of land. And extensive private borrowing must kad to higher interest, and probably a slump. Defending what had' been done in. tho past, Sir Joseph Ward said that in one district alone 28 estates of a value of ,£213,000 had been cut up in five years. This showed that the system had been a great spur to the cutting up of large estates. New Zealand was a country which must have email estates. He was not a single-taxer, nor a land-nationalis-er; but he would not bo surprised if the Danish system had to bo adopted in' New Zealand before many years had passed. This system had brought about an enormous increase in the number of freeholders, and had very soon doubled the production. A Minister: Why didn't you try that? Sir Joseph Ward: Now that is tho sort of argument w'liieh does not need answering lit all. He added that the former Government had done its best in the time ot its disposal; they could not run before they walked. PRIME MINISTER REPLIES. • CONFIDENCE IN FREEHOLD. Tho Hon. W. F. MASSEY (Prime Minister) said ho felt disappointed with tho speech of the member! for Awarua—and disappointed for an unusual reason, that he had not attacked the Bill. Ho complimented the member for Awarua on his speech, and congratulated him on his change of front.' He did not agree with one opinion expressed :thnt tho Bill should have gone to the Public Accounts Committee. He (Mr. Massey) believed that the Bill wns a good Bill, and ouo that would be generally approved. On only one point had the lion, member attacked the Bill, and that was on account of another Bill that had not yet made its appenrauce—he referred to the Bill to modify the method of assessing laud raluations so as to exempt improvement from taxation. And yet the hon. gentleman approved of "that principle, too. Then why had not tho Bill been brought down years ngo? It was argued by the hon. gentleman that by the new valuation method the Government would lose as much revenue as it would gain by the increased graduated tax. On the contrary, the men whose, improvements would 'be properly allowed for would lw the sninll holders, who farmed intensely, and improved their land. The holders of lsr?fl area?, who would be affected bv the KjJwtsd tas* did Rot .umalh; improve.

their lands, and the improvements were no very considerable portion of the capital value of their holdings. He spoke in favour of the freehold as being tho best tenure to encourage settlement and bring land under cultivation. Cheap Freeholds. Tho Labour Government of Australia was oll'ering to prospective immigrants cheap freeholds. air. Payne: Hear, hear. air. Isitt: Have we the area of Ausrralia? air. Ma.-sey: "In proportion lo our population wo have an area equal to Australia. And wo have large areas of unoccupied land." He argued that it was th» duty of the Government to increase the number of producers on the land. Ho looked upon it as his duty to bring land under cultivation, and he was doing all ho 'could to bring that about. Only tho other day he had completed the purchase of an estate in Southland, and that day he had purchased another- estate iu Hawke's Bay. . Mr. Brown: Did you enter into the negotiations for that estate? -^f'T"air. aiaa-ey: Yes. ,"'"'-. • air. Brown: Hear, hear. air. aiassey said ho hoped to make more announcements of the same kind very soon. Ho disputed the argument that there would bo a slump if the freehold became general. He had another Bill iu preparation which would provide two methods of acquiring'land from largo holders without cost to tho State, a,;id without increasing tho indebtedness of the State. He said that the' Government's object was to subdivide, not to nationalise, the land. air. Wilford: Is it not better to burst up the big estates instead of buying them ? air. Massey said that he would deal with that aspect later. Would it be credited that when the new system came iuto operation double the number of estates would be affected. In saying this he was referring to the high scale— above ,£30,0(10, the estates affected by the change. One hundred and sixty-two estates of over .£40,000 were affected now, and under the new proposals 330 would be affected. The Hon. I?. M'Kcnzie: "Will (he total payments be inurdaaed?" Mr. Massey: Certainly. But it is impossible to say how much it will le increased. The Bill, Jlr. aiaSFe.y contended, was quite sufficiently drastic. If it was more drastic some of the settlers would lose confidence. He believed that the Bill was fair and reasonable. He would like to have exempted mortgages from the graduated tax, but mortgages had to bo included to meet possible circumvention of the spirit of the Bill. air. Hanan: That is what I have always told you. air. Massey: Yes; the honourable gentleman has often expressed that opinion, and I have come to agree with him. (Hear, hear.) There would be no need for the provision if all the land-owners, were honest men., Jlr. Wilson: They nearly all are. air. Massey: Yes, I agree that tney nearly all are, but there is a black sheep here and there, just as there is nmoug politicians. (Laughter.) Mr. Massey 'concluded by saying that ho was pleased at the reception which the Bill had pot in the House and in the country. THE TAXING OF MORTGAGES. THE VALUATION BILL. The Hon. D. BUDDO (Kaiapoi) said he was always pleased to see a sinner recant, and ho was glad to see that tho Prime Minister had recanted in the matter .of.tho taxing of mortgages. He mis in hearty accord with most of the provisions of the measure.- But while he was generally in favour of the Bill, he recognised ttiat it was quite possible that under -a changed system of valuation the effect of the Bill" would be that not so much revenue would be derived f.rom_ the tax as was expected. After all the Valuation Bill was the measure in which the House must be niost. interested. Personally, he would do his best to assist tho Prime Minister to pa?s the, measure in tho best shape in which it conld serve the country's interests. air. G. W. RUSSELL (Avon) said that the increase proposed was not so great in some cases as had been anticipated, but on nio whole the Bill was an improvement on. the present system. The Minister could be quite sure that there would bs no captious' opposition from the Opposition benches. It seemed to him to be an anomaly if a tax which was intended to have the effect of bursting up bie estates should apply to large industrial concerns, such as big meat companies. ■ The plan to caleli them would bo to tax them upon their profits, air. Russell was alluding to big enterprises such as "big newspaper concerns," and their position in respect of taxation. A nvp.mber: They pay income tax. air. Bus-sell:/ But why not a graduated income tax? Speak Up. air. J. V. BROWN (Napier) said that the member for Awarua should feel satisfied to know that,tho Bill which he had introduced had been adopted by the present Government—with one or two amendments. On several occasions, members called upon air. Brown to speak louder. , Finally, someone asked: Why won't the member speak up. A member: Ho keops on dropping his voice. Another member: He's losing his vigour! (Loud laughter.) Continuing, air. Brown said that when the Prime Minister had been in Opposition he had been always urging that the Maoris should be taxed the same os tho Europeans. Why had the present Bill not proposed to bring that about. The Prime aiinister had said that he was going to follow out a policy of putting .people on the land. If air. Massey practiced what he preached respecting that subject, he would have air. Brown's support overv time. air. G.' WITTY (Riccarton) 'said that it would/have been a very easy matter to have'introduced a graduated income tax proposal. They did not wrtnt. to bring too much land into the market at ono time. New Zealand was a country which must have small estates, and the only, way to break ; up the, big estates was by taxation. It was the duty of Parliament to provide land for the landless. OPERATIONS OF SYNDICATES, LAND VALUATIONS. air. G. WITTY (Riccarton) said that that it would often be better for the State to purchase lands rather than that estates should be cut up - by syndicates. He gave instances in which ho said that the State had refused to buy land at certain piices and syndicates had afterwards bought the land and sold jt. at greatly advanced prices. He said that one estate had been offered to the Government at ,£23 pnr acre, and the Government had refused on the ground that the price was too high. A syndicate had purchased tho land, and had sold it at «£32 per acre. Mr. Payne interjected some suggestion. air. Wilson: I will leave the "Leader of tho Lonely party to , introduce ihat Bill himself. Mr. E. NEWaiAN (Raugitikei) said that in the last number of years thero had been an increase of 165 per cent in the number of ratepayers in the Hawke's Bay county. Ho read a list of big properties .in Hawke's Bay which had been considerably reduced, or.sold entirely, in the last five years. Altogether over 218,000 acres of land had been cut up by the landhhltos themselves .in tho last five years. • This showed that the graduated tax was having effect. The. 'large- landholders must bo treated fairly, aild he was old enough to remember when some Hawke's Bay landholders were ruined. The pioneers had done excellent work, and that must notbe forgotten. It would be a national calamity if some big estates were cut up; some of the stud Hocks and herds were of great value to the country. He was glad, that the clause relating to the incomes of married women was to be reconsidered. Ho had been afraid that the Government might go too far, but they had not done so. He hoped to see one or two amendments in committee; otherwise he would support the Bill. Thcro was, as air. Witty had said, a danger of trouble ensuins if too much land was put on to fhe market at ono time. Mr. W. C. BUCHANAN (Wairarapa), speaking on the question of valuation, said that very little credit was due to successive Governments in their valuation of land, aien who had been, failures at everything they had .undertaken had 'wen entrusted with this work, which involved very large sums of money. The Stow should engage for this work the vt-ry jjajt inss* ii Ausycg sas jfl bs done le-

tween settler and settler in this serious matter. He hoped that tho Government would take this point into consideration. He congratulated tho Minister for Finance (Mr. Allen) on the Bill , which the Minister hail brought down, and oil the reception which had been accorded the inensure. The Broad Object. Mr. T. M. WILFORD (Hutt) said that be was not to oppo-e the Bill; he wns going to help the Minister, bat. ho hoped to ii'sist to prime the measure. Thu broad object to keep in view was to aim at increasing production and lessening prices. A feeling was coming over him that, they should operate by -bursting up big estates, rather than by purchasing and re.'ellinj; them, /ta to Mr. Newman's reference to the pioneers, ho would like to remark that there wero not many pioneers alive now. Tho defendants of the pioneers were in a very different position; it took no more brains to fall into a fortune than it needed brains to fall into a punt. He would support tho Bill heartily if he was sure that it meant what it said. He hoped that au idea wjiich he had to the effect that tho Bill did not mean what it said was a wrong idoa. By all means bring into force as quickly as possible tho graduated laud tax. Regarding tho provisions in tho Bill to deal with manufacturers' agents, Mr. Wilford said that he was in accord with the Minister. He questioned, however, if there would not still bo a loophole by which the tax could be avoided. He suggested that tho draughtsmen should consider, in this connection, the case of an English firm which, instead cf havin? an agent here, formed their New Zealand business into'a. local company here, which would bo nominally a company, but really only .an agency for the purpose of carrying on the English. business. t ON IRRELEVANT CRITICISM. "TOO SUSPICIOUS." The Hon. A. L. HERDMAN (Minister fur Justice) said that the hon. gentleman's criticism had not been very deadly, and'a great deal of it had not been relevant. Mr. Wilford's objection wasthat English companies carrying on business through agents here, who did not show profits, might escape income tax. Of course, if there were no profits made the company concerned would not be liable to income tax, but the Bill was designed to prevent all profits earned in New Zealand from escaping proper taxation. Tho hon. member had also viewed the Bill with suspicion because, as he said, the valuations would be so reduced tlsat there would be no increase of taxation. The hoii. member was too suspicious; he judged the Government by his own standards. In answer to the cry that the tax ought to be heavy, enough to burst up tho large estates, he said that in legislation Parliament must be just to the community. If the minimum was to be reduced to X 25.000 or .£20,000, or ,£10,0011," great injustice would be done to a great many, people. It must bo remembered that this was not the only means of settling people on land, for there were many lands ,in New Zealand which were not being 'used. Mr. Hanan Indignant. Mr. J. A. HANAN (Invercargill) said he was annoyed to see the Government introducing such a measure. How many of the Ministers had advocated an increase of tho graduated land tax at last election? The Hon. F. M. B. Fisher: Oh, lots of thorn. Mr. Hanan: Name two of them. Mr. Fisher: M'r. Hcrries . and. myself aro two of them. Mr. Hanau maintained that the member for Wairorapa and the Minister for Finance had departed from their previously expressed views in which they declared against a graduated land tax, which they said was confiseatory. He declared amid much derisive hiiißkler, that tho Government had been dragged at tho chariot wheels of the late "Liberal" Government, and wero now following its lead in tho legislation they were submitting. He was only sorry that the- House could not, in Committee, reduce the minimum below ,£30,000. Tho present Government- was only a power by accident, (More laughin-:) . MINISTER FOR MARINE, 'A' PERTINENT QUESTION.. The Hon. F. M. B. FISHER (Minister for Marine) said that ho had heard many amusing speeches in the House, but the speech ho had just heard surpassed all in his previous experience. For him to declare that the Government was in power by accident! Mr. Hanan, a member of what might bo termed an "illegitimate" Ministry, to say the Government were iu power by accident! 3lr. Isitt: Point of order. Is that Parliamentary language? Mr. Speaker: I don't think there is any objection to that. (Laughter.) A Government member: You don't like tho truth. Mr. Fisher said the Government party had got into power by an absolute majority of tho House. Mr. Hanan had been a member of a Ministry which had got into power by tho casting vote of the Speaker, put on record as being cast .in accordance with constitutional procedure and nothing else. The honourable gentleman had found fault with the Government. , But why, when tho late Government had been in power with a majority of i'i in the House—a majority of three times the strength of the party opposed to them—why did fhey not increase the graduated land tax ? For the past six years they had a majority 'of 48 for three years and 24 for three years, and in all that time, when they conld have passed any measure their Prime Minister might like to suggest, they had never dared to touch this question of graduated land tax. ' . - Mr. Russell: You are not in accord with your own leader on tho question of leasehold and freehold. Mr. Fisher (laughing):' That is a little joke that I can enjoy with you, aiid 1 enjoy it better from this side of the House. But he .added that he was in hearty, accord .with his Leader in any proposals to settle people happily on the land. He deprecated the method of criticism adopted by the member for Invercargill in having called the member for Wairarapa because he was prepared to vote to inorease taxation upon himself. There won, members oh the , : Government side of the House who would be hit by this tax, as heavily as any men in. the country, and they ought to bo tmited with respect for supporting it. Instead of that they had be=u reviled as hypocrites. "Why," asked Mr. Fisher, "with all the Radicals, Progressives, and true Liberals on that side of the House —-" air. Anderson: A nice lot they are, too! Mr. Fisher: Why should tliere bo any necES-sity, after they have been in power for 20 years, to bring in this Bill? Mr. Russell: We settled si^million acres in the last 10 years. Mr. Fisher (derisively): You settled 5J million ncres. They aro the party who accused us of selling the national •estate, and they are the party that told 71 million acres of it. . air. .Russell: No. Mr.'Fisher: Tho hon. gentleman says "No." • Jlr. F. H. Smith:' A very weak "No," too. ■ i air. Fisher said ho could only use tho words of •no of air. Russell's Chrisfcchurch friends, and say that for twisting and turning ho took the cake. Ho went on to fay that there wero men on the 'Government side of the House who wero as radical as radical could be. They .wanted land settlement, and if it did not come about by this Bill they would have other legislation which would bring it about. Mr. 11. G. ELL (Christchureh South) said that taxation should be a means of remedying the inequality of the distribution of wealth. He was afraid that by the proposed new valuation tho actual amount of taxation to 02 collected imder the Bill would be reduced. air. G. V. PEARCE (Pntea) said that the mortgage tax would fall heavily on some of the small formers in his district. air. J. PAYNE (Grey Lynn) said that in tho whole of the debate there had not been a single progressive thought set forth. There had been a groping around in the realms of the dark ages. He had expected something better from the Reform party, which had meandered about the country with such great professions of reform. It was a barber's cat Budget, and a barber's cat amendment Bill. Mr. A. T. NGATA said that under the strict reading of- this Act the bulk of the "Maoris" were Eurone.ni-. Me. dealt with ■thi.s alleged anomaly, and with othw noinH concerning the Native race at jcugtli,