8.—6.

I should observe that on goods paying duties by quantity, exact particulars as to the value were procurable in the department, but with regard to other commodities, the information has been obtained by careful investigation. The Government deem it necessary to strongly urge an immediate increase in the Customs duties, and they wish to record their opinion that the tariff, with the increases proposed, will not be so severe on the colonists as the tariff in force in years past. The alterations we propose are for revenue purposes. Each item is more or less calculated to add to the returns. The Committee, however, should be glad to learn that many of the changes are of a character likely to stimulate local production. People are in the habit of comparing New Zealand with other colonies, without remembering the difference in its position. It has not the land revenue of those colonies, and it started in the race handicapped with large expenditure, consequent upon Native affairs. Some idea of the difference with regard to land revenue may be gathered from the following, which is as correct a return as I can obtain of the land revenue of the Australasian colonies during the last six years. It will be seen New Zealand stands fifth on the list: — £ New South Wales .... .... .... 12,008,572 Victoria .... .... .... .... 4,699,714 South Australia .... .... .... 3,307,789 Queensland .... .... .... 3,290,163 New Zealand .... .... .... 2,560,492 Tasmania .... .... .... 385,710 Western Australia .... .... .... 362,071 I shall have something else to say about the financial results consequent upon the land policy pursued in the colony, but, in connection with the present topic, it is only necessary to point out that we have much less use of this sort of revenue than the other colonies ; in fact the expenditure exceeds the revenue. It means, of course, leaving a large source of revenue to the future, and as regards its effects on our loans I do not know that lenders of money, who ponder over the question should think worse of a colony that reserves its capital and does not use it for yearly revenue purposes. An increase in the Customs revenue naturally brings us to a consideration of the system of direct taxation, by means of the property-tax. Had I, as Colonial Treasurer, a fresh field to start on I should recommend a land-tax and an income-tax in lieu of a property-tax, though I am not blind to the fact that there is a great deal to be said on each side. The chief objections to a propertytax are that it taxes unproductive property, discourages investment, and leaves untouched, incomes upon which savings are not made. The chief objections to a land and an income-tax are, that the first leaves unaffected a really beneficial owner in the soil—the mortgagee; and that the second would, in a large number of cases, leave real incomes to escape, and would mainly reach those whose incomes arose from that uncertain commodity—brains. There is, of course, a vast deal more to be said about all these questions, and especially it may be urged in favour of the present system that people are accustomed to it, that contracts have been made depending on it (such as those between mortgagors and mortgagees), and that an alteration should not be lightly made. At any rate, as the Government do not now propose a substitution, I need not discuss it; but, clearly with the contingency of increasing the property-tax before us, we are bound to consider its present operation from various points of .view. A favourite alteration of the property-tax, and one frequently mentioned, is repealing the exemptions. It often happens with public affairs that something becomes fixed almost by accident, and that round it grow so many interests as to make any alteration impossible which ignores them. The exemptions now granted are a case in point. On whatever principle they were first framed they have grown into an adopted custom, the alteration of which involves considerations not taken into account.at the outset. They act as a much larger

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