TAXATION OF LAND VALUES.
L'ro THE EDITOR Or TAS "SPIICTATOR."1
Sln,—In connexion with the Budget proposals, it may be of interest to quote from a Memorandum prepared for the Royal Commission on Local Taxation by Mr. Harper, assistant- valuer to the London County Council, Mr. Harper explained that until land becomes ripe for building it would inflict hardship to assess it upon any greater value than the annual revenue which, at the time of valuation, it is capable of yielding. Such land is often called accom- modation laud, and is used as pleasure-grounds, cricket-fields, and tennis-lawns, or sometimes as market-gardens and for agricultural purposes. The reasonable rent for such land, taking one year with another, less a fair percentage on the capital outlay for such temporary improvements as cricket pavilions, would be a fair basis for assessment. It is true that such land possesses a capital value greater in proportion to the annual revenue derived'from it than usual. This propor- tion is greater or less according to the length of time likely to elapse before the land becomes absolutely ripe for building ; and the extra capital value represents the equivalent in present money 'of a future annual 'value 'not now realisable. It does nob' seem practicable to use both annual value and capital value as bases of assessment for the same tax ; and unless the former is to be wholly dropped there would be grave danger in adopting the latter in any special case :-
" Assume, for the sake of argument, that an acre of land is expected to yield, 20 years hence, a ground rent of 4100 per annum. Its present capital value would be about £S00, though it might not be yielding a higher rent than ..f.4 per annum. Taking 4 per cent. on capital value would give an assessment of 432, or £27 per annum more than the land could yield under existing conditions. And as the 4100 per annum would, when it arose., be liable to the tax, any charge upon the 432 assessment could only fall, by anticipation, upon the same revenue, which would thus be taxed twice over."
It is difficult to reconcile Mr. Harper's objections to a tax on capital values with his evidence in favour of taxing site• values in towns, the site value being " the annual equivalent of the capital value which the site would fetch as a cleared site at Tokenhouse Yard." The "annual equivalent" is merely a percentage. However, he shows the absurdity of taxing un- covered laud on the outskirts. A tax of a halfpenny in the pound on the capital value does not seem much, bet in the example given by Mr. Harper of land valued at £800, it Would mean £1 13s. 4d. per annum out of a rent of £5,—nn Income- tax of £33 6s. 8d. per cent. On the other band, the land would not be worth £800 after the tax, and no one could
possibly guess what the land would be worth. In towns building sometimes goes on to a certain point, and then you find tracts of land not built on, while just beyond houses may be found. By going a few yards further people get out of the area of urban rates. But before this happened most people would have thought the nearer land the more valuable and more " ripe for building." Even under the conditions rebus sic stantibus any valuation would be rather a guess, but with a proposed tax of £33 6s. 8d. per cent, of the annual rent as a beginning, it is plain that no one could put a fair value on the land. However much the owner of such laud might want to sell or lease it, no one would take it unless he had a firm order for a certain number of houses. The speculative builders' business is usually regarded as risky even under present conditions, and they would probably decline to take the risks proposed by the Chancellor of the Exchequer.—I am, Sir, Sze.,
JOHN SMITH,
P.S,—As to the tax on minerals, who would be taxed in the case of copyhold land P
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