Evening Post. TUESDAY, AUGUST 11, 1936. TO STOP SPECULATION ?

Evening Post, Volume CXXII, Issue 36, 11 August 1936, Page 8

Evening Post. TUESDAY, AUGUST 11, 1936. TO STOP SPECULATION ?

The intention of the Government to introduce its Mortgage Adjustment Bill early and give the-country an opportunity to study its provisions is commendable. The Bill -is to be the second part of the Government's plan to aid farmers, and its provisions will decide the character of the first part of the plan—the guaranteed price. If the Mortgage Adjustment Bill is a simple writing-down measure, then the guaranteed price and the mortgage adjustment together will be nothing more than a gift and a subsidy to the farmers now {in occupation of the land. The value of this gift will be capitalised on sales, and the aid to farming -will be an aid to speculation. To be more than this the legislation yet to be passed must contain safeguards against speculation. The Government wishes to provide these safeguards, and has declared more than once that it will do so. Yesterday the Prime Minister repeated this declaration. It was not the Government's intention, he indicated, after the primary producers had been restored to a normal basis, to allow conditions in the future to operate which would bring about the f financial embarrassment to primary producers that had occurred in the past. One of the chief aims of the Government was to prevent land speculation, and that could be brought about by taxation. "Whatever form of taxation is necessary to take for the community what belongs to the community will be carried into effect." : It is informative to compare this statement with the Budget announcement of the reintroduction of the graduated land tax. The purpose of land tax is, in principle, to obtain for trie community the values created by it, the Minister of Finance stated. The principle behind the policy of the Government is to ensure to those who utilise land the maximum payment for, their labour. In other words—the farmer's eyes should be on the return from his products rather than on the acquisitive possibilities of profit derived from land sales. Applied to city, suburban, or rural land, values that accrue through public activities and increased population should automatically come to the State, and the policy of the Government will be directed to this end. Summed up, the procedure will mean the minimum taxation on the working farmer and home owner, with increasing rates on abnormally large holdings, and other areas held in many cases for speculative profit instead of for use in production. ■ ' iWe have quoted this extract from the Budget at length because, read in conjunction with the Prime Minister's statement of yesterday, it suggests that the Government regards the graduated land tax as one of the main safeguards against speculation. There are two reasons why it must I prove almost wholly ineffective. In! the first place, if.the tax is to be soj heavy as to operate as a deterrent on sales it must also reduce the return received by the working farmer. "It must be accepted," said Mr. Nash in the Budget, "that a charge on land of any kind reduces its selling value, such selling value being based on the net return which can be obtained from the land after all charges have been paid, which means that, given stability in prices and costs of production, a reduction in land tax is a gift to the immediate land owner. Conversely, an increase in the tax must be met by the immediate owner." Obviously an annual tax which is to cancel out the sales value of a mortgage reduction or a guaranteed price must also cancel the benefit., To reduce selling value, which is based on net return, a reduction in net return must also be effected. What the Government seeks (and cannot secure through land taxation) is to give the farmer* benefit, but prevent him from trading with it. There is, however, a second and even more weighty reason against the possibility of checking speculation by the imposition of graduated land taxation. The land tax does not apply (except in a negligible measure) to smaller properties. The mortgage exemptions prevent this application. Under the present law (and mortgage and other exemptions are not to be altered) there is a maximum exemption of £7500 for registered mortgages where >the unimproved value does not exceed £7500. Thereafter the exemption is diminished by £1 for every £1 above £7500 unimproved value so as to disappear altogether at £15,000. Thus a property of £10,000 capital value and £7500 unimproved value with a mortgage of £7500 would pay no land tax. It is plain that this means that all heavily mortgaged dairy farms will be quite unaffected by the graduated land tax. That was the Labour Opposition's argument when the previous Government removed the tax. It is the Labour Government's argument now when it proposes to reimpose the graduated.land lax. If the taxation does not fall on

these properties it can affect neither the net return nor the selling-value. As a prevention of speculation in such properties, therefore, it is wholly useless, yet it is in these properties, to which mortgage reduction and guaranteed price benefits arc to be given, that the greater danger of renewal of speculation arises. The very fact that they are heavily mortgaged indicates primarily that they have been trafficked in during past years, and the mortgaging prevents a check being applied by land-taxa-tion. This applies also to small house properties: The graduated land tax passes them by. Yet no one would deny that house properties and small farms have been speculation counters in the past. There has probably been far more gambling in these holdings than in the big and expensive blocks (both urban and rural) on which the graduated land lax will fall. Any-argument, therefore, that seeks to justify the graduated land tax as a safeguard against speculation falls completely to the ground. The tax may. operate in rural areas to force subdivision (and "The .Post" has supported it for' this reason in the past), but in the cities 'its principal result must be to extract more revenue from businesses which occupy and use fully the more expensive sites. Most of these businesses will be hit twice. Once by the graduated land tax, and next by the steeply graduated company income tax. In the cities, the cumulative effect of these imposts, with the added charges arising from industrial legislation, must he a hindrance and handicap, not to speculation, but to the legitimate expansion of industry and commerce upon which the Government must finally depend for real recovery.