Extracts from the Report of the Select Committee on the Land Values Taxation, etc. (Scotland) Bill, signed by the Committee on December 13TH, 1906.

It will be observed from the foregoing description of the proposals of the Bill that land values are not taken as the sole basis of Burgh rating. The rating of occupiers is to proceed upon the present basis - the annual value of land and buildings taken together as a composite subject. The rating of owners is to proceed partly on the present basis and partly on the basis of land value alone. The amount of the new rate is fixed, ab ante, at 10 per cent. on the new standard, regardless of all other considerations. The Bill does not therefore give complete effect to the new rating standard which it sets up. It is confined in its operations to Burghs. It leaves owners as well as occupiers of land and buildings still rated on the present basis, the rental of the whole composite subject. It leaves them so rated in the same proportions as they are rated at present. And it proposes to levy on owners alone an additional rate, fixed, no doubt, on a basis assumed to be sound, but absolutely arbitrary in amount. Your Committee consider these proposals to be indefensible. No evidence was adduced in support of them. No one justified the choice of 10 per cent. It was apparently arrived at by haphazard without any calculation or estimate of what its effect would be. The objections entertained by your Committee to the proposals of the Bill were such as to compel them to come to the conclusion that it ought not to be proceeded with in its present form. But as a large amount of evidence was laid before your Committee bearing upon the principle which underlies legislation of the class to which this Bill belongs, your Committee deem it to be their duty to express their views upon the main topics to which that evidence was directed.

The main principle which, in the opinion of your Committee, underlies proposals to tax land values, is the setting up of a standard of rating whereby the ratepayer's contribution to the rates is determined by the yearly value of the land, which he owns or occupies, apart from the buildings and improvements upon it, the object being to measure the ratepayers' contributions, not by the value of the improvements on the land to any extent, but solely by the yearly value of the land itself. The justification given for the adoption of the new standard is that land owes the creation and maintenance of its value to the presence, enterprise and expenditure of the surrounding community. The value of the land is not created or maintained by the expenditure or exertion of its owner, except in so far as he is a member of the community. It is well, therefore, to select a standard of rating which will not have the effect of placing a burden upon industry. Hence the proposal to exclude from the standard the value of buildings and erections of all kinds, and fixed machinery. To include these in the standard tends to discourage industry and enterprise. To exclude them has the opposite effect. If then, the value of bare land, apart from improvements, be chosen as the measure by which to fix contributions to local expenditure, the ratepayer will, it is alleged, be merely restoring to the exchequer of the local authority part of that which he has derived from it. Of this principle, and of the reasoning on which it rests, your Committee approve.

The direct effect of the adoption of the principle enunciated in the preceding paragraph will apparently be to effect a complete redistribution of the burden of rating. Owners inter se and occupiers inter se will pay the new rate in very different proportions from those according to which they now pay. Owners of valuable land, either unoccupied or occupied by buildings unsuitable to the site, will pay more; owners of highly utilised land will pay less; and owners of land put to ordinary average use will pay the same proportions as at present. The indirect effect of the adoption of the new standard will be to stimulate building and improvements, to bring more building land into the market, to lower rents, and to diminish overcrowding.1 To what extent the burden of rating would be redistributed by the adoption of the new standard must, it is apparent, be matter of conjecture, inasmuch as no reliable data exist from which to form a just estimate of the value of land in Scotland, apart from the buildings and improvements upon it. It seems to your Committee, therefore, to be absolutely essential, before the proposed new standard is adopted, that such a valuation be made. The question which has engaged the anxious attention of your Committee, and to which prominent attention was directed in the evidence, was, whether to make such a valuation is reasonably practicable.

Your Committee, therefore, come to the conclusion that the valuation of building sites is practicable, and is not substantially more difficult or uncertain than is the valuation of many other subjects which fall under the definition of "land and heritages" as used in the present Valuation Acts. Nor is it to be forgotten that the duty of fixing the value of the site is, in the first instance, laid on the owner himself. His estimate will probably be very near the mark. Unwillingness to decry the value of his own property will prevent exaggeration in a downward direction, as the dislike to pay more rate than he can avoid will check exaggeration in an upward direction. The resultant of these two conflicting forces may be expected to yield a just result.

1 See also Cannan on the proposed relief of buildings from local rates (Economic Journal, March, 1907).

The exclusion of those who draw feu duties from the category of ratepayers is maintained on various grounds. It is said that they are simply out and out sellers of the land who have lent the purchase price to the buyer and continue to draw interest upon it in the form of feu duty. They are thus mere creditors of the owner, and are not themselves owners. It is said, further, that the owners of feu duties, whether the original granters of the feu, or purchasers at a full price of the right to the feu duties, have made a contract under which they are absolutely entitled to payment of a fixed yearly sum, subject to no diminution, and that they have bargained with the feuar that he shall not only pay that fixed sum, but shall also bear the burden of all rates that may be imposed in respect of the yearly value of the property. Exemption from rating under the proposed new standard is, therefore, sought, first, on the ground that the superior is not an owner, but merely a creditor of the owner; and, second, on the ground that he has made a firm contract by which he has secured release from all local burdens.