Taxation in New Zealand 13 



present it is id. in the pound on the unimproved value. Owners 

 of land of which the unimproved value is £500 or less pay no tax. 



The tax on mortgages on land was formerly the same as the 

 tax on land, but in 1902 the rate was lowered to }4d. in the pound 

 and has not since been changed. The tax is paid by the mort- 

 gagee, that is, the mortgagee and the mortgagor are treated as 

 joint owners of the land. In making up the total assessed valua- 

 tion on which an owner pays taxes, the amount of mortgages 

 owing by him is deducted from the unimproved value, while the 

 amount of mortgages owing to him is added thereto. If such net 

 value is not over £500 the owner pays no taxes; if it is £1,500 he 

 pays on £1,000 and there are diminishing exemptions up to 

 £2,500, at which point the exemption ceases and the owner pays 

 on the full unimproved value. 



When the tax on mortgages was first imposed it was said that 

 it would fall on the borrowers, since the lenders would charge a 

 rate of interest sufficiently high to recoup themselves. Mr. 

 Reeves states that such has not been the case, 1 but the tax was 

 small and its effects were obscured by changes in the rate of in- 

 terest due to other causes. From 1891 until about 1898 the rate 

 of interest on mortgages declined, but afterwards rose. In the 

 year 1898-99, about 58 per cent of the money lent on mortgages 

 was lent at 5 per cent or less, but in the year 1906-7 only 53 per 

 cent was lent at such rates. It seems probable that, if the tax 

 had not been imposed, the rate of interest would have fallen more 

 during the former period and would not have risen so high in the 

 past few years. At the present time, which is a time of financial 

 stringency, borrowers find it hard to get money either from the 

 government or from private lenders, and the chambers of com- 

 merce of the Dominion seem to be unanimous in the opinion that 

 the mortgage tax prevents capital from coming to New Zealand, 

 and forces New Zealand capitalists to lend their money else- 

 where. 2 Certainly, a good deal of New Zealand capital has been 

 invested abroad in recent years. 



The government is urged to abolish the mortgage tax and to 



1 State Experiments, vol. 1, p. 261. 



2 Evening Post, Wellington, April 13, 1909. 



261 



