Taxation of Land Values

Irish Review (Dublin)

Taxation of Land ValuesAuthor(s): Justin PhillipsSource: The Irish Review (Dublin), Vol. 3, No. 36 (Feb., 1914), pp. 614-620Published by: Irish Review (Dublin)Stable URL: http://www.jstor.org/stable/30062986 .

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TAXATION OF LAND VALUES

THE IRISH STANDPOINT

BY JUSTIN PHILLIPS

T HE last important change in our rating system was made under an Act passed in 1852, when one uniform principle of valuation of land was extended to the whole of Ireland.

The result is that the value of land for rating purposes has been

fixed, and cannot now be altered, except by application to the Lord Lieutenant, for a re-valuation of any County, Poor Law Union, or

Barony. The rateable values of buildings, mines, fisheries, and so

forth, are arrived at, having regard to the net annual value, and

may be varied from time to time. Notwithstanding the fact that it is possible to have the rateable value of land changed, no application in this direction has yet been made, and, as a result, the duties of the Valuation Office now consist mainly of revision work in properties of a variable nature.

The rateable value of land being fixed, may, to some extent, account for the apathy of Irish ratepayers-particularly those whose

payments are mostly for rates on agricultural land-in regard to the

controversy at present taking place in England as to the suggested change in the incidence of rating. But, as it is highly probable that fresh legislation on this subject may be applied to Ireland, it behoves Irish farmers, who, it is submitted, are more directly inter- ested in this questidn than any other members of the community, to

endeavcur to ascertain how far their interests might be affected by the enactment of any of the various proposals at present under consideration.

To understand the reason for the present campaign for rating reform in England, it should be remembered that there matters are different, as the rateable value of land may vary from year to year, and is arrived at by considering the rent at which the hereditament might reasonably be expected to let from year to year, free of all usual tenant's rates, taxes, tithe commutation and rent charge, and and deducting therefrom the probable average annual cost of repairs,

614




insurance, and other expenses necessary to maintain it in a state to command such a rent. Thus all the improvements which a farmer

may make in his position by increasing the productivity of his land

by adequate manuring, high cultivation, drainage, the use of new and efficient machinery, or by additional and improved buildings, may involve him in additional payments in the form of increased rates.

It would appear from the Report of the Land Enquiry Com- mittee, published a few months ago, that there is serious dissatisfaction with the present system amongst the English farmers, and a considerable body of evidence is printed tending to prove the

injustice of the present method of rating whereby any improvements which farmers make in agriculture involves them in an increase in their rates. English farmers contend that the rateable value of their land depends solely on the rent, and that as their rent is increased by the landlord-surely a sufficient burden in itself-so also are their rates increased. So great is the dissatisfaction with the existing system, that a large number of farmers are demanding that all buildings and improvements be exempt from rates, and that the value o/ land alone be made the sole basis of local rating. In this demand they are supported by the Land Values Group of English Members of Parliament, led by Baron de Forest, and by a society for the propagation of the economic philosophy of Henry George, headed by Mr. Joseph Fels. Furthermore, a memorial to the Government in favour of the taxation of land values for rating purposes has been signed by one hundred and thirty-three Liberal Members of Parliament, by forty Labour Members, and approved of

by a large number of the Conservative Party. Although the Land

Enquiry Committee have not yet made any definite recommenda- tions as to what charges they deem advisable, it would appear from the evidence they have printed that they, too, are in favour of making land the sole basis of taxation for local purposes. This would be the thin edge of the wedge of the Single Tax Policy; and, once

accepted, might ultimately lead to the acceptance of the broader aspect of the question-the taxation of land values for both Local and Imperial purposes, and thus to Land Nationalisation.

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THE IRISH REVIEW

Now we know that manufacturers, and those resident in the towns, strongly approve of the proposal to transfer to land the entire burden in regard to local contributions. It can hardly be denied that the present system of rating buildings is one of the main causes of the wretched housing conditions prevailing in so many towns

throughout the country. Everywhere we hear complaints of lack of good housing conditions, and the great problem of overcrowding cannot be abated owing to lack of alternative accommodation.

Consequently we have " mean, straggling towns arid and unlovely," disreputable dwellings, slums, decaying workshops and factory premises. Workers are compelled to work in unsanitary factories, to live in tenements, and to pass their lives under the most revolting conditions, simply because the rates on new and proper buildings make it prohibitively expensive for the workers to rent decent

dwellings, and highly unprofitable for a builder to erect them. Private enterprise is discouraged, because if a builder, for instance, erects a row of houses at a cost of gio,ooo, he at the same time confers on the rating authorities power to exact an annual sum of about r500, by way of rates, from the persons who occupy the houses. The capitalised value of this charge, at 4j per cent., is

d11,II2.

Benevolent municipalities have, of late, begun to erect work- mens' dwellings, and to let them at a figure considerably below the commercial rent. They realise that, having regard to present conditions, a workman cannot afford to pay a commercial rent for a dwelling; but they have taken no steps to inquire into the cause of the prevailing high rents. They build houses, let them at a loss, and make up the deficiency out of municipal funds; whereas if the

present system of rating were abolished, and a system for the taxation of land values substituted, there would be no necessity to lose money on housing schemes, as the rents on urban houses would be at once reduced by from 25 to 40 per cent. without any loss to the owners. It is the endeavour to provide for the payment of the rate burden that renders the rents excessive.

Manufacturers, too, are discouraged from erecting decent factory 616




premises, because before they have any opportunity to secure a return for their outlay, they are obliged to pay heavy rates. Rates go up every time manufacturers add to the comfort of their workers by improving their premises. If rates were taken off all buildings, there would be an immediate encouragement to capitalists to erect new dwellings and large airy factories and workrooms, without fear of being penalised for their enterprise and humanity. The cities and towns would probably become more prosperous and, undoubtedly, infinitely more beautiful.

To say that the present system of rating is a hindrance to trade, a menace to all industrial aspiration, the root cause of the slum problem, and the enemy of decent living and proper working conditions, would perhaps be an exaggeration. But we must face the fact that it is a contributory cause to some of our worst social evils, and as such, stands condemned. How to change it without

inflicting any hardship on the tillers of the soil is the problem that is awaiting settlement.

Knowing that the acceptance of the principle of the taxation of land values would throw the entire burden in respect of local charges on land and completely relieve buildings from all liability, we can well understand the farmer holding a view entirely contrary to that held by the manufacturer and the townsman. The attitude of the

English farmers in demanding that land itself be made the sole basis of local rating is, at first sight, difficult to understand, but is

explained by the fact already shown, that between the Irish and the

English systems there is an important difference.

Viewing the present proposals from the broadest standpoint, we cannot fail to be convinced that the Irish farmers would strongly resent any attempt to apply these proposals to Ireland. Generally speaking, there is no considerable discontent with the existing system. It, however, happens from time to time that a progressive farmer, anxious to improve his farm, and who with the aid of a loan from the Board of Works or by the expenditure of some of his reserve capital, had erected new buildings, finds that the rateable value, and consequently the rates, on his buildings are increased.

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THE IRISH REVIEW

He very naturally resents such an imposition, and fails to understand why he should be compelled to contribute an extra annual payment by way of rates, simply because he had worked hard to erect a better

dwelling--the payment for which alone is sufficiently difficult to meet. He is penalised for being progressive, while the worthless and incompetent farmer who allows his outhouses to fall to the

ground is subsidised through a reduction in his share of liability for local charges. But this is not a typical case, and it may be pre- sumed that, taking them as a body, Irish farmers do not desire any change in the present system.

Should any British Chancellor of the Exchequer propose to

apply the principles of the Land Tax in England, he is assured of considerable support, not alone from the Liberals, but from the Conservatives. Irishmen should not forget that the present Liberal

Party is primarily a manufacturers' party, and as such must favour a reform which would remove the entire rate burden from their

property. Also, the Labour Party is unanimous in its demand for reform in this direction. Past events have shown that in the matter of applying English legislation to Ireland scant consideration is

given to the wishes of the Irish people, and in the present circum- stances the English farmers would demand the application of the same rating principles to Irish and English land on the ground that unless this be done their produce would have to enter the market in competition with Irish farm produce, grown on land free from

liability for a large proportion of rates, and also receiving State

grants in aid. Under the Local Government (Ireland) Act, I898, a sum is paid

annually out of Imperial Funds in aid of the rates on agricultural land. For the year ended 3Ist March, 1912, the agricultural grant amounted to a total sum of a727,337, and was equal to 22 per cent. of the whole revenue of the County Councils for the year. In

making this grant the Government of the day acted contrary to the most elementary principles of the taxation of Land Values, and to-day the rates on land are lower, by the amount of the Govern- ment contributions, than the rates on houses.

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Should an attempt be successfully made to apply the advocated reform to Ireland, the owners of land, whether as ground landlords or as farmers, will find that the change will mean that in future they will have to contribute the full amount of the rates hitherto borne

by house property, and so forth, to the total rateable value of

p6,745,706. As the present total rateable value of all land in Ireland is i9,049,856, the present rate burden on land would be practically doubled if it had to bear all the expenses of local authorities. This would be a serious matter, and would be bound to cause universal dissatisfaction amongst owners of land. In Ireland the interests of the farmer are paramount, and must be considered before the interests of those engaged in non-productive callings, and any reforms likely to act against agricultural development must be rigorously avoided. This may seem a selfish policy, but in accepting and advocating it we are only accepting the lesser of two evils. It is admitted that if buildings and improvements were exempt from liability for rates, agricultural activity, in so far as the building of better farm dwellings and outhouses, might be stimulated, and new employment given to builders and their workers. Furthiermore, it is admitted that the fundamental weakness of the present rating system is the penalty which it imposes upon development, and that there is neither sanity nor justice in penalising an individual for being progressive and industrious, or in subsidising him if he permits deterioration. But what prospect does the alternative system, the taxation of land values for rating purposes, hold out to the agriculturist? This system would impose the entire burden for local purposes on his land- which is, after all, the raw material of his trade-it might ultimately lead to the taxation of land alone for both local and imperial purposes; and when this would have been accomplished, the nationalisation of land would be merely a matter of time. We know that the Irish farmer would pour boiling oil on the head of anyone who would dare to attempt the nationalisation of the land he has fought so hard to secure; and lest the occasion should arise when he would find it necessary to protect his interest by resorting to such an extreme measure, he should be careful not to accept any change in

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THE IRISH REVIEW

the incidence of rating without realising fully the ultimate possibili- ties and economic effects of such a change.

To remove the charge of imposing a penalty upon development made against the present system, and in order to meet the interests of industrial development in this country, it would be desirable if local authorities were empowered to exempt from liability for rates, for any reasonable period, any new building erected within the area under their control for the purpose of starting a new industry or of

developing an old one. This exemption would be a sort of local

subsidy, and should prove to be a substantial encouragement to

capitalists anxious to start a new industry, while at the same time

mitigating the penalty at present imposed upon Industrial and

Agricultural development. The local authorities might also be

empowered to exempt, for a period of five or ten years, all new

buildings erected for purposes other than the purposes of manufac- ture if they were of opinion that such exemption was necessary to

encourage better housing. This system of exemption obtains in

many of the most progressive towns in Canada, New Zealand, and Australia, and the Governments in these countries, in appealing to

prospective settlers, and especially to manufacturers, lay emphasis on the fact that all new buildings are not rated. It has been found that by granting such exemptions considerable impetus has been

given to industrial development, particularly in those industries

requiring extensive housing accommodation. The matter might with advantage be taken up by our Industrial Development Asso- ciations, and there is little doubt that the local authorities, and

particularly the County Councils, would look upon such a proposal favourably.

Thus the evils of the present system would be remedied, industrial development would receive local encouragement, the

building of new houses for the working classes would be stimulated, and the change would be accomplished with the co-operation and

good-will of all parties, and without causing any dissatisfaction amongst those concerned in our principal industry.

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Taxation of Land Values

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