Difficulties of Valuation and suggested safeguards.
It may be convenient that we should here briefly summarise the conclusions which we have formed on the question of Urban Rating, and to which we desire to call special attention. They are as follows: (1.) That misconception and exaggeration are specially prevalent on this subject.
(2.) That, as a rule, others besides the freeholder are interested in site values.
(3.) That the value of the site as well as of the structure is at present assessed to rates.
(4.) That, while site value is enhanced automatically by extraneous causes, yet it has no monopoly of such enhancement; but that the outlay of ratepayers' money does increase the value of urban sites to a special, though not easily measurable, extent.
(5.) That site and structure, which are now combined for rating purposes, differ so essentially in character that they ought to be separately valued.
(6.) That, when separated from structure, site value is capable of bearing somewhat heavier taxation, and should be made to bear it, subject, however, to strict respect for existing contracts.
(7.) That the differential treatment should take the form of a special site value rate, payable in part by means of deduction from rent on the Income Tax method, and that thus a part of the burden should visibly fall on those who have interests superior to those of the occupier. (8.) That, subject to the conditions which we have specified, the special site value rate should be charged in respect of unoccupied property and uncovered land. (9.) That, if proper regard be had to equitable considerations, the amount capable of being raised by a special site value rate will not be large; and that the proceeds of it, whatever the amount may be, should go in relief of local, not Imperial, taxation. (10.) That it may be well to apply the scheme on the principle of "local option," and to limit the immediate introduction of it to urban places, having a population in excess of a given number, and of a given density. The advantages which can be claimed for the proposal are, we venture to think, not inconsiderable.
Summary of conclusions.
(1.) It would conduce to placing the urban rating system on a more equitable and thus sounder, basis. (2.) It would be making the ground-owner, and others who may under the leasehold system acquire an interest in site values, contribute somewhat more to local taxation than they do now, and the contribution would be direct and visible. (3.) It should go some way towards putting an end to agitation for unjust and confiscatory measures. (4.) It would enable deductions for repairs to be made solely in respect of the buildings. (5.) It would do something towards lightening the burdens in respect of building, and thus something towards solving the difficult and urgent housing problem. (6.) It would tend to rectify inequalities between one district and another district, and between one ground-owner and another ground-owner. (7.) It would, or at least it should, conduce to the removal of some of the widely spread misconceptions which seem to prevail, not only in political circles, but among economic authorities and responsible statesmen; for, while it would be an admission that there were defects in the urban rating system and an attempt to remedy those defects, it would show that there is no large undeveloped source of taxation available for local purposes, and still less for national purposes. We would point out that, if a moderate proposal to effect these objects is ever to be made, it would be specially opportune to make it at a time when, under the schemes which we are putting forward, the burden of rates in towns will be appreciably relieved. By making use of this opportunity, it will be possible to introduce a sound and advantageous principle into our local taxation without disappointing legitimate expectations. More especially, since anything that tends to relieve the pressure of local taxation, or to prevent the growth of it, must ultimately, sooner or later, benefit the owners of site values, it seems desirable that any increased provision made by the State in aid of services locally administered shall be accompanied with some make-weight in the shape of an owners' site value rate.
Advantages of the proposal.
For the reasons explained in the former Report, we conclude that a separate valuation of sites, apart from the structures upon them, should be made, and a rate proportioned to the site value alone should be levied for urban improvement purposes in the larger burghs. It should be divided equally between occupiers and owners. All existing contracts should be absolutely respected, but, in the case of future contracts, the owner should be entitled to deduct from any rent, feu duty or ground annual payable to a superior, the amount of the rate in the £ upon the value which attaches to the site at the date when the contract is made: a like right of deduction being given to any intermediate parties against their superiors. The rate should apply to unoccupied property and uncovered land under the conditions laid down for England.