THE TRICKERY OF THE LAND TAXES.
ALTHOUGH the introduction of Mr. Lloyd George's Revenue Bill amounts to a confession of the com- plete failure of the land value duties, the Unionist Party in the House of Commons will do well to examine with the closest scrutiny the provisions of the Bill. It is intended to mitigate the rapidly growing unpopularity of his patent 'system of taxation, but while undoubtedly removing to some extent the grievances which have become politically dangerous to the Liberal Party, it leaves in exist- ence the greater part of the evils arising out of the Land Value Duties. The whole of the present costly system of land valuation is to be maintained and even extended, although the insignificant revenue now obtained from the Increment Value Duty will be reduced almost to zero. Moreover, the very concessions made involve legal and administrative complications which must add immensely to the already heavy cost of collecting these useless taxes.
Take, for example, the first clause, which is intended to prevent increment value duty being charged on any increase in price which a person obtains for his land owing to his own efforts. Experience has shown that duty is often charged in cases where the increased price obtained is due to financial assistance given by the owner to persons erecting buildings or is due to a proper arrangement of the land for sale. The clause allows in such cases as these a deduction to be made before duty is charged, but it is almost impossible for any official or body of officials to say with precision how much of the increased price of the land is due to the factors mentioned. The necessity for mentioning them only proves that the theory of levying an increment duty is fundamentally unsound.
A different and more far-reaching consideration arises on Clause 2. This is intended to deal with the famous Lumsden case, where a builder was charged increment value duty on a property on which he had built a house, although it was admitted in evidence that the value of the bare land had not risen. The fact that Mr. Lloyd George should have introduced provisions for meeting this case is in itself a confession of the breakdown of his theories, for until a few months ago he was defending the exaction of duty in this case on the ground that Mr. Lumsden had obtained a "fortuitous windfall," coming to him "as an incident to the monopoly of land ownership." It may be left to Mr. Lloyd George to explain this sudden change of attitude within a period of eight or ten weeks. As regards the clause itself, however, it is the duty of the Opposition to examine the wording with the greatest care. In order to make the proposal contained in the clause clear it is necessary to explain that the Inland Revenue Com- missioners and the draftsman of this Bill both draw a distinction between the market value of a property and the price which it actually fetches. In their conception the market value is the value that the Lloyd Georgian valuers choose to put upon the property, and in the Lumsden case the " fortuitous windfall " was the difference between this price and the price which the property actually fetched. The new clause proposes that in certain circumstances the price actually fetched may be ignored, so that if a builder is fortunate enough to obtain a peculiarly good price be will no longer be liable to pay duty upon it. But apparently there is nothing to prevent the land valuers from shifting their ground and showing a large taxable increment by putting the value high on the occasion of a sale. It must be remembered that the land valuers when making a valua- tion on the occasion of a sale will have before them the price actually realized, and with that fact as common property it will be difficult for the owner to resist a high valuation on that occasion if he has sold for a good price. Thus there appears to be still a danger that the Inland Revenue Department may continue the practice of taxing " fortuitous windfalls," although the inventor of that phrase has abandoned the theory that they ought to be taxed.
The third clause is intended to relieve capitalists and speculative builders who are engaged in developing building estates, but here again if the clause be examined it will be seen that it contains many pitfalls. To begin with, it specifies that the buildings are to be " suitable," but what does the word " suitable " mean, and who is to be the authority to interpret it ? Again, the buildings must be valued at the rate of at least £500 for every acre of land, but it is conceivable that in some modern garden city provision might be made for attaching considerably more than an acre of land to a comparatively small house, so that a working farmer might cultivate the land more or less as a market garden. In such a case this clause would give no protection to the developers of the estate. Finally, the protection given is limited to a period of five years. Yet everybody knows that in many building estates the developers may have to wait ten or fifteen or even twenty years before their original outlay comes back to them.
The next clause, Clause 4, is intended to deal with the case that has recently attracted much notice in the press, of the unfortunate road-sweeper at Willesden who was charged £4 15s. id. Increment Duty on a property on which he had made an aggregate loss of £54. This is the sort of case which Liberals do not like to hear mentioned on the public platform, and Mr. Lloyd George's clause for dealing with it is, so far as it goes, entirely satisfactory. This unfortunate road-sweeper was caught in a trap because he had failed to claim what is technically known as the " substituted site value " when the original valua- tion of his property was made. Clause 4 of the new Bill provides that it shall no longer be necessary to claim substituted site value when the valuation is made, but only when a demand for Increment Duty is made. This is a common-sense provision which would have formed part of the original scheme if that scheme had had any touch with common sense.
From the theoretical point of view the most interesting clause of the Bill is Clause 5, which is intended to exempt small investors from Increment Value Duty. In order to get the benefit of the exemption the value of the property sold must not exceed £500, and the income of the owner must be under £160 a year. The introduction of this clause amounts to the complete abandonment of the whole theory of the special taxation of land values. That theory rests upon the proposition that the ownership of laud is a thing so absolutely apart from all other forms of ownership that the persons who have been guilty of the crime of buying land or have suffered from the accident of inheriting it are not entitled to the same consideration as their fellow citizens who possess other forms of property. The extreme land taxers never hesitate to demand that land should be taxed up to 20s. in the £ on its full annual value, so that the whole of the value of the land would accrue to the community instead of to private owners. The People's Budget was avowedly a step in this direction, and the provisions for valuation contained in that budget and extended in the present Bill are designed with the purpose of preparing the way for this scheme of spoliation. Yet here we have in Clause 5 of the new Bill an explicit admission that taxes ought to depend, not upon the kind of property an individual owns, but upon his total means of payment. If the theories of the late Henry George, which his namesake has adopted, are worth anything at all, they are equally valid against the poor man and against the rich man, and by putting forward an exemption for persons whose total income is less than £160 a year Mr. Lloyd George has in effect abandoned the whole moral— or immoral—basis for his land tax theories.
It is impossible within the space available to deal in detail with Clause 6, which is put forward to meet the difficulty arising in cases where the "assessable site value" of land comes out as a minus quantity. All we can for the moment say is that this clause does not meet the difficulty, but creates new anomalies and fresh confusion.
With regard to the concessions made in the clauses dealing with the Reversion Duty, it is sufficient to say that they largely destroy the theoretical case for this essentially unjust tax. More importance, however, attaches to the final clauses, which deal with valuation. The official memorandum explaining these clauses makes the frank con- fession that the valuation, which has been going on all over the country for the last four years at a cost now amount- ing to nearly £2,000,000, does not " give the true value of agricultural land until it ceases to be agricultural." In other words, so far as regards the greater part of the area of the United Kingdom this costly valuation is practically useless even for the purposes which its author had in contemplation. It will be necessary to have a new valuation of all agricultural land, and this means that the process of valuation, which we were promised would come to an end in 1915, is to be continued for many years longer. Clauses in the present Bill provide that the revaluation of undeveloped land which should have taken place in 1914 is to be postponed ti111916, and that the periodic valuation of property belonging to corporate bodies is to be postponed till 1919. So that the country may look forward to being saddled with the present army of land valuers, who are now costing £680,000 a year, at least until 1920.
After this confession one cannot help admiring the grave sense of humour shown by the author of the Treasury memorandum explanatory of the Revenue Bill. It will be remembered that originally the People's Budget gave half the proceeds of the land value duties to local authorities. This gift has been repeatedly postponed, and in explaining that a clause is required to sanction further postponement the author of the memorandum says it is required because otherwise it would have been necessary in the year 1914 " to pay out of the Consolidated Fund a sum equal to half the net proceeds of the duties on land values." The net proceeds of the duties on land values are in the current year, and will be next year and for many years to come, a minus quantity. The local authorities will therefore, doubtless, bear with equanimity the postponement of the promised dole. The final effect of this new Bill is to make the Land Value Duties more hopelessly ridiculous as a financial proposition than they wore before. The huge expense of valuing all the land of the kingdom on a fantastic principle was incurred essen- tially for the purpose of levying Increment Value Duty. That duty does not apply to agricultural land as long as it remains agricultural, and the present Bill sweeps away the duty in the case of considerable areas of urban land. It is doubtful whether the tax will now yield more than £5,000 a year, but the country will remain burdened with an expenditure of more than £500,000 a year to collect it.
Previous page
