LAND TAXES. The taxation of land is one of the oldest forms of direct taxation. As the main source of production in the past and as a definite and visible sign of wealth, land offered a natural subject for taxation and the history of taxation teems with taxes levied by reference to its area, value, or produce.
While land continues to be a fruitful source of tax revenue, it is usually as part of a general scheme for taxation of all property or all income and not as the subject of peculiar taxation levied specially in respect of the land. Thus the value of land comes under charge to British Death Duties in common with the value of all other property, and the income from land comes under charge to British Income Tax in common with all other income; but this taxation is general and is not properly to be considered as falling within the scope of specific Land Taxes.
The Land Tax is the only form of land taxation in Great Britain. It is an old tax, dating from 1692, having developed from the so-called Monthly Assessments under which Parliament specified for each county the total sum required and each county raised its contribution by a rate upon the yearly value of all property, real and personal, and on the income from certain offices. In intention, the Land Tax was a kind of general property and income tax, but personalty gradually escaped from assessment, and in 1798 Pitt made the quota then due from each area a perpetual charge on the landed property of that area, with provision enabling the owner of the property to redeem the liability by a capital payment. The Land Tax thus became converted into a redeemable rent-charge on landed prop erty, and in its essentials, it remains to the present day as Pitt left it. Each parish has its quota to be raised annually and this is levied by a rate not exceeding i/– in the £ on the annual value of the land and buildings thereon in the parish. An owner of the land can redeem the charge by payment of a capital sum equal to 25 times the annual tax and where redemption is effected the land is exonerated from the tax and the quota of the parish is correspondingly reduced. As the annual value of any buildings erected on the land comes into the annual value for charge to Land Tax, redemption generally takes place as a preliminary to building operations. The average annual receipt is about L65o,000.
In modern taxation theory the land tax finds its place in systems of taxation not as part of a general tax applying to all property but as a tax that singles out land as the subject of special taxation, and it is in this sense that the term is now generally used. This development is founded on the theory that land has an additional and special taxable capacity peculiar to itself by reason of the fact that the increase in its value in many places is due not so much to the activities of the owner as to the growth in prosperity of the community. It involves the
task of ascertaining the values of the land at different points of time and making allowance for the then value of any improve ments (e.g., buildings, timber, crops, etc.) due to the action of the owners, in order to find the unimproved or site value. The determination of values of this kind which differ radically from market price values of the land in its actual condition presents serious difficulties, particularly where the tax is levied on the unearned increment only. These difficulties do not favour clear and unambiguous legislation and afford ground for disputes of all kinds. They are at the root of the failure of the British Land Value Duties, which became practically unworkable after a few years' operation.
The following notes refer very briefly to the modern taxes in troduced in the United Kingdom, Australia, New Zealand and Germany.
The new land taxes were introduced by Mr. Lloyd George in his 19o9 Budget, and were the main cause of the hostility encountered by that Budget in its passage into law by the Finance (1909-1o) Act, 191o. There were four duties, viz. :—(i.) Increment Value Duty, which was levied on every "occasion" of sale or transfer of land at the rate of 2o% on the increase in the site value of the land accruing after 3o April, 1909. Provision was made for periodical assessments every 15th year in the case of land held by corporate bodies: (ii.) Reversion Duty, which was levied at the rate of io% on the value of the benefit accruing to the lessor on the termination of long leases, the benefit being in general the difference between the value at the beginning and at the end of the lease: (iii.) Undeveloped Land Duty, an annual duty of Id. in the £ on the site value of un developed land, i.e., land not being used for agriculture, business or building purposes, etc., and was intended to fall on land ripe for building. Gardens, public parks, recreation grounds and wood lands were exempt : (iv.) Mineral Rights Duty, an annual duty of i/-- in the £ on mineral royalties, wayleaves, etc. As a pre liminary measure it was necessary to ascertain the capital value of all lands, buildings, etc., in the Kingdom as at 3o April, 1909 a colossal task involving the valuation of Ii,000,000 units of land—and in particular to determine the "site value" which represented, broadly speaking, the market value of the land when divested of buildings, trees, or other improvements upon it. The work of valuation proceeded for 5 years and was practically com pleted by the outbreak of the World War. The total of the valu ations for Great Britain was about 15,250,000,000.