The question has frequently been raised how far "capital value" or "selling value" as opposed to "annual value" or "rental value" should be made the basis of valuation.

"Site value," as explained to the Royal Commission on Local Taxation by Mr. Costelloe and Mr. Harper, is a new conception which certainly differs from "annual value" as defined by the Courts, because it is proposed that sites should be valued independently of the actual uses to which they are put at the time of the valuation, instead of according to existing circumstances and conditions, that is, according to the legal maxim, rebus sic r.l.v. e stantibus. On the other hand, it is not clear that site value can be said to be quite the same as capital value, because it seems that the annual ground rents, which could be obtained for different sites, would not always represent exactly the same percentage on the selling value of those sites on account of the difference in security.

Costelloe, 20,422.

Costelloe, 20.422, and Vol. II. of Min. of Ev., App. No. XL, par. 56. Harper, 12,578-9, and Vol. IV. of Min. of Ev,, App. No. VII., par. 1. C. (ii.),

Site value is defined in the Resolutions of the London County Council as "the annual rent which at the time of valuation might reasonably be obtained for the land as a cleared site if let for building by an owner in fee, subject to equitable reduction in exceptional cases in which the full site value thus defined is not being enjoyed or obtained by any person or persons."

By way of further explanation, Mr. Costelloe, on behalf of the London County Council, in the memorandum prepared by him for the Commission, said: - "What I call, for the sake of clearness, the site value, is defined in the Council's resolution as being the annual equivalent of the capital value which the site in question would fetch at Tokenhouse Yard, if for any reason the premises upon it were cleared away, as, for example, if they had been burnt to the ground. This is my own definition, and after most exhaustive discussions in the committee and the Council, I am convinced that it is a reasonable and correct statement in a practical form of the value which ought to be taxed. It is intended to represent the value of that parcel of ground considered as a site, and without regard to the structures which happen, in fact, to have been placed upon it. These structures may, or may not, be the ones most suitable to utilise the advantages of the site."

It is obvious that in ordinary cases the annual value of any property tends to represent the market rate of interest upon the capital value (though that market rate of interest differs in different cases). That this is the case is shown by the fact that the Courts have repeatedly authorised the application of the principle of "contractor's rent" (i.e., the sum of percentages on the capital values of land and structure) for determining the annual value of the class of property which is not usually let. The cases in which annual value cannot be described as a percentage on capital value, are chiefly those comparatively exceptional cases in which the condition of the property is likely soon to undergo change. In these cases, the test of annual value, interpreted in the light of the legal maxim, rebus sic stantibus, gives a result which stands in no definite relation to the selling value, i.e., in the case of land ripening for building, or of a valuable site occupied by old or unsuitable buildings.

Moulton, 22,949, 23,080. Poland, 2193, 2475.

Vol. II. of Min. of Ev. App. No. XI.

Poland, 2108.

Rating on capital value may, however, mean two different things : (1.) Looking at a property as a whole without regard to the several interests in it, it is possible to ask either what the property would sell for, or what it would, or does, let for, and it is possible to arrange taxation with reference to either basis, whether the tax be charged upon the occupier, or upon the owner or owners, or partly on one, or partly on the other. (2.) Looking at the property as split up into several interests, it is possible to ask either what is the income, or use equivalent to income, enjoyed in any year by each of the parties interested, or it is possible to ask what is the capital or selling value of each of these interests. The schemes put before the Commission by Mr. Harper and Mr. Moulton clearly contemplate making a valuation of the site on a basis somewhat akin to "capital value." The subsequent distribution of the burden among the various interests would not, however, be in proportion to the capital value of each of those interests,1 since no person having an interest in the site is to be rated upon a higher sum than he actually receives, the tax being levied upon a method adapted from that of Income Tax (Schedule A.).

Harper, 22,301, 22,315-9, 12,578-80. and Vol. IV. of Min. of Ev., App. No. VII., par. 1 (b).

Harper, Vol. IV. of Min. of Ev., App. No. VII., par. 4. Moulton, 22,868, 22,924, 23,022, 23.059, 23,078-82, 23,088,

23,156-7, and Vol. IV. of Min. of Ev., App. No. X., par. 8.

1 Mr. Costelloe's answers on this point are not sufficiently clear to enable a definite statement to be made of his precise meaning. [Costelloe, 20,155-66, 20,188-9.] Mr. Moulton says: "The taxation is calculated according to annual return, but I do not say that the rate at which it is calculated is the same for all kinds of property" (23,067). " I do not neglect capital value in classifying properties in order to determine the rate per cent. of taxation" (23,071).

But the idea of splitting up the interests of the various parties concerned, and making a separate valuation of each upon the basis of "capital value" or "selling value," appears to have been present to the mind of several witnesses. In certain cases it is not easy to discover which application of the principle the witnesses had in view. No practical proposal was, however, put forward for annual rating in respect of the capital value of the several interests in a property, and it may be pointed out that it would involve (1.) The ascertainment by the Valuation Authority of the different interests in every property; (2.) A separate valuation of each interest which would need annual revision; (3.) The direct collection of the rate from the owner of each interest, instead of adopting the schemes of Mr. Harper, and Mr. Moulton, which follow the lines of the Income Tax Acts (Schedule A.). The separate taxation of every person interested in a property upon the capital value of his interest, might, however, it has been suggested, be carried out by means of a Municipal Death Duty, which is discussed presently.