Robert Murray Haig.

The exemption of improvements from taxation in Canada and the United States [electronic resource] : a report prepared for the Committee on Taxation of the City of New York online

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taxes. But whatever attraction there might be in the town system for the
business man is nullified to a large degree by a special business tax which the
town imposes. Every business man, in addition to the tax on the value of
the building, pays a tax apportioned according to the floor space occupied
and type of business carried on. Of course, the Alberta tax on stock in trade
for school purposes tends to offset the town's business tax.

Still another complication exists in the relative weight of the tax bur-
dens on the two sides of the line. The tax rates given above cannot be taken
as a true indication of this because of the different standards of assessment.
In the town, real estate is under-assessed about fifteen per cent., according
to the testimony of real estate men. On the other hand, the village is
accused of over-assessing land in order to keep down its tax rate. There
is some feeling in Lloydminster on this subject. The town officials refer one
to the real estate men and the real estate men politely inform one of their
entire ignorance of land values in the village. One business man in the town
testified that he owned two lots in the village assessed at $900 apiece which
he would gladly sell at $200 apiece. He stated further that the taxes on
these two lots were almost as large as the taxes on thirteen lots, his house
and his barn in Saskatchewan. Other citizens accuse the village of over-
assessment, but these charges are all flatly denied by the village officials.

Some color is lent to the charge of over-assessment in the village by the
fact that the assessment in 1914 was increased about $150,000 in spite of
the fact that there has been no perceptible growth in the community. Ap-
peals representing the owners of approximately one-half of the land in the
village had been filed in August. The total assessment of the village in 1913
assessment, but these charges are all flatly denied by the village officials.

A comparison in the tax levies does not show that the cost of govern-
ment is greater to the villagers than to the townspeople. In 1913 the tax
levy for general purposes in the village was $4,349.90 and in the town was
$8,939.26. It will be seen that the per capita cost was almost exactly the
same on both sides of the line.

In view of the complications described — the historical antagonisms


between the town and the village, the under-assessment of buildings in
Saskatchewan, the assessment of improvements and stock in trade for school
purposes in Alberta, the business assessment in the town and the alleged
over-assessment of land in the village — it is not surprising to find a lack of
clear-cut phenomena available for judging the effects of the system. The
size of the community rendered it a simple task to count all the buildings
except residences and stables, and this was done. There were eighty-three.
Twenty were in Alberta and sixty-three in Saskatchewan. In view of the
fact that the Saskatchewan town site was the original one and that a large
number of business lots were disposed of before the Alberta town site was in
existence, the number of business places in the village is just about what one
would expect, irrespective of the tax system.

Locahon of Business Bu//cf/hc7 s

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If the business men realized that there would be an advantage from
the point of view of taxes in locating in the town rather than in the village or
vice-versa, they would not be free to move. An official in the village who


feels that the advantage Hes on his side of the Hne says that the business
men remain on the Saskatchewan side of the hne through stubbornness.
" They are Enghsh, and do not know when they are hcked." But probably
good business sense forbids them to risk a challenge to local pride. More-
over the change would, of course, involve expense. Whatever the explana-
tion, all agree that there is no perceptible movement across the line. Cer-
tainly the town is not gaining in business at the expense of the village.

The effect upon persons choosing a site for building residences is not
what one would expect it to be. There is no special tax on residences in
Alberta, corresponding to the tax on businesses in Saskatchewan. Moreover,
the land in the village is somewhat higher, and therefore somewhat more
attractive for residences than the land in the town. But nevertheless more
new houses have been built in the last few years on the Saskatchewan side
than on the Alberta side and the town houses are fully as costly as the village
houses. There are only nine houses which cost more than $5,000 in the
whole community. Three of these are in Alberta and six in Saskatchewan.
The largest and best house was built three years ago on the Saskatchewan
side. There is a very pronounced disposition among the business men to
build their residences where their business is carried on. Only four men
whose places of business are in Saskatchewan live in Alberta. The one
satisfactory explanation is that the bonds of local pride and jealousy and of
indirect economic advantage are strong enough to hold against the force of
the direct economic gain which would come through locating in the village.

There can be little doubt that the advantage to homebuilders lies with
the village rather than with the town. Not only is there much more vacant
land in the village, but also more of it is owned by non-residents. But the
town is entirely satisfied with its system. There is absolutely no disposition
to decrease the assessment of buildings below the present figure. The towns-
men seem content to sit by and allow the village to experiment, ready to
laugh at the ruin which they think they foresee. Doubtless when enough of
the old town spirit dies out, as it will with time or increased growth, the
village and the town will amalgamate. In the meantime, it is not a good
place to search for the effects of the single tax. There is nothing in the com-
plicated situation which justifies drawing conclusions either in favor of or in
opposition to the plan of exempting improvements from taxation.


The Province

British Columbia, the most western province, is very mountainous. The
Rockies and the Selkirks He to the east and the Cascade (or Coast) and
Island ranges to the west. Rich valleys and tablelands lie between the ranges.
The great interior plateau lying to the west of the base of the Selkirks
forms the chief agricultural area. The province is approximately seven
hundred miles long by four hundred miles wide and contains the whole
western slope from the crest of the Rockies to the Pacific.(l)

Until recently, because of the lack of adequate transportation facilities,
ranching was practically the only form of agricultural activity which could
be pursued. Fruit growing has now superseded ranching in importance and
dairying is rapidly developing. Grain is not raised in great quantities.

The chief industries of the province are fishing, mining, and lumbering.
Most of the fish taken are salmon, but in recent years herring and halibut
fisheries have been developing with great rapidity. For the year ending
March 31, 1913, the value of the catch was $14,478,078.(2)

The mineral resources of the province have scarcely begun to be devel-
oped. Large quantities of gold, silver, lead, copper, zinc, and coal are avail-
able. The value of the output of the mines in 1911 was $23,499,072, and in
1912, $32,440,800.(3)

It is estimated that there are 15,000,000 acres of merchantable timber
in the province. In 1913 the amount of lumber produced was said to be
1,457,041,939 feet(4), with a value of about $32,500,000. The general con-
dition of the lumber industry is at present somewhat discouraging, the slump
in building operations in the Canadian Northwest affecting very seriously
the prosperity of the lumberman. In 1913 the consumption of lumber in the
four western provinces was approximately 450,000,000 feet less than in 1912.

A table in the official yearbook which attempts to present the facts in
regard to the manufactures of British Columbia in the year 1910 gives the
total value of manufactured products as $63,797,494.(5) In this list are
included concerns which produce electric light and power, gas light and heat,
coke and preserved fish. Two hundred and twenty-four of the six hundred
and thirty-nine establishments are listed under the heading " log " products
and thirty-nine under " lumber " products. More than one-third of the
value of the total manufactured products is credited to these two groups of

The Census of 1911 reveals the fact that the urban population of British

(1) Yearbook of British Columbia, Manual of Provincial Information, Victoria,
1914, p. 106 et seq.

(2) Ibid., p. 37 et seq.

(3) Ibid., p. 402.

(4) Ibid., p. 384.

(5) Ibid., p. 401.

Y 163

Columbia i^ extraordinarily large as compared with the rural population.
Of the tolU population of 392,480, 203,684 live in cities and towns and
188,796 injtural districts.

The yft revenue of the province for the fiscal year ending March 31,
1913, was'jl2,510,215.08.(l) For the fiscal year ending June 30, 1903, ten
years previous, the net revenue was only $2,044,630.35. The largest single
item of receipts in 1913 consisted of the income from timber royalties
and licenseTI which amounted to approximately two and one-half million
dollars ($2,^57,129.37). Almost equal in importance was the income from
land sales iamounting to $2,344,596.52. The income from the tax imposed
upon incoi\iing Chinese yielded, in 1913, $1,723,990.60. Subventions from
the Domir.'bn Government amounted to three-quarters of a million of
dollars ($732,489.46).

It will be seen from these statements that the province depends upon
ordinary forms of taxation for only a very small part of its total revenues.
In 1913 the so-called " revenue tax ", a per capita tax, yielded an income
of $360,663. This particular tax has now been abolished. The tax on
real and personal property, including wild lands, and on incomes yielded,
during the same period, approximately one and one-half million dollars

The cost of the debt service for the fiscal year ending March 31, 1914,
was $539,944.11. The Estimates for the fiscal year ending March 31, 1915,
called for the expenditure of $541,736.61 for this purpose. The balance
sheet of the province on March 31, 1913 showed outstanding bonds to
the amount of $11,369,218.

The largest item among the expenditures is that of public works,
$7,664,468.64, having been spent for this purpose in 1913. The largest
share was used for roads, streets and wharves. The estimates for 1915
call for the expenditure of $5,316,575 for public works.

The province returns to various localities a very large proportion of
the money raised by taxation. Thus in 1913 the grant for schools, which
is apportioned on the per capita basis, amounted to $855,771,91. In addi-
tion there are substantial grants for hospitals.

In addition to the distinctly provincial expenses which must be met
out of the provincial treasury there are also the local expenses of the
unorganized portion of the province. Indeed, most of the territory included
within the limits of the province is as yet unorganized and in this territory
the province has direct control. All the taxes are imposed and collected
by the province and the receipts form a part of its consolidated revenues.

In the parts of the province which have been organized and granted
rights of local self government, the province has relinquished real estate
as a subject of taxation; but in all such parts, including even the cities of
Vancouver and Victoria, the, province continues to extend taxes on other

(1) The statistics of income and expenditure are taken from the Public Accounts
for the Fiscal Year ending March 31, 1913. Printed by authority of the Legislative
Assembly, Victoria, 1914.


bases such as income and personal property. In addition to t^xes on real
estate the municipalities have also sources of income from ^censes and
frontage taxes. Thus, although the division of the field between the
province and the localities is complicated, there is entire sei>aration of
the sources of taxation. The retention by the province of sevZral sources
of direct taxation within the municipalities may be said to be largely com-
pensated for by the subvention system referred to above.(l)

The law under which provincial taxes are assessed and.xollected at
present was adopted in 1903, but has been revised in importa^-. particulars
since that date, one important change being the eliminatioii of the per
capita tax in 1912 as a result of the recommendation of the } oyal Com-
mission on Taxation of 1911.(2)

Taxes are levied on improved real estate at the rate of one-half of
one per cent, of their value. No exemptions are allowed for buildings or

Wild lands are defined as " all land, other than coal land and timber
land, claimed by any person on which there shall not be existing improve-
ments to the value, when estimated, of $2.50 per acre in addition to the cash
value of the land itself, on land situate west of the Cascade Mountains,
and of $1.25 per acre on land situate east of the Cascade Mountains."
Such lands are taxed at four per cent, of their value. (3)

Personal property is taxed at the same rate as improved real estate,
i. e., one-half of one per cent., but there are very liberal deductions. The
most important of these exemptions are moneys deposited in bank ; unse-
cured book debts ; the produce of farm lands ; live stock, agricultural imple-
ments and machinery, and vehicles to the value of $1,000; household effects,
and mortgages upon land or property in the province. (4)

Measures are taken to prevent double taxation by taxing a person
both on his personal property and on the income arising therefrom. The
law governing this point reads as follows :( 5)

When any person is assessed and taxed on personal property
from which his income is derived, the amount of the tax on such
personal property, if greater than the amount of the tax on his
income, shall be the only tax payable, in respect of both income and
personal property; if the tax on income is greater in amount than
the amount of the taxes on personal property, the amount of tax
on income shall be the only tax payable in respect of both income and
personal property, and in the event of the amount of the tax on
personal property and the amount of the tax on income being equal,
the tax on income shall be the only tax payable in respect of both
income and personal property.

(1) Cf. supra, p. 163.

(2) The tax laws were consolidated under the date of April 28, 1913. The general
reference is to the Revised Statutes, B. C, 2 George V, 1911, c. 222; 1913, c. 71. For
the law governing the taxation of forests and Crown timber lands, cf. Statutes, B. C,
2 George V, 1912, c. 17 ; 1913, c. 26.

(3) Ibid., s. 9; 2 George V. 1911, c. 222, s. 2.

(4) Ibid., s. 8. :

(5) Ibid., s. 11.


The rates on income are progressive. The first $1,000 is exempt. The
rates on other taxable incomes are as follows :

Class A, Less than $2,000 taxable income 1 %

Class B, $2,000 to $3,000 taxable income 1>4%

Class C, $3,000 to $4,000 taxable income 1^ %

Class D, $4,000 to $7,000 taxable income 2%

Class E, More than $7,000 taxable income 2^%

Coal lands are divided into two classes, and a discrimination made in
favor of those mines which are being operated as compared with those
which are not. Class A, which consists of " worked mines ", is taxed at
one per cent, of the value; while Class B, which consists of " unworked
mines ", is taxed at two per cent.

Timber land, which is elaborately defined in the Act,(l), is subject
to a two per cent, tax, which may be rebated where the timber is manu-
factured or used in the province. Moreover, this rate does not apply when
the provincial royalty on timber is collected. This royalty is a charge of
fifty cents per thousand feet of board measure on all timber cut from
Crown lands, from railway subsidy lands, and from lands held on lease or
license from the Crown ; and a charge of twenty-five cents per cord on wood
cut on Crown lands, timber leaseholds and timber limits. (2)

The ordinary taxes on incomes, on personal property and real estate
apply to all corporations except those particularly specified in the taxation
act, upon whose gross receipts a tax of one per cent, is levied. These
specified corporations are life, fire and other insurance companies, guaranty
companies, loan companies, trust companies, telegraph, telephone and
express companies ; gas companies, water works companies and electric
lighting companies, power and street railway companies. Individual stock-
holders are not assessed on dividends of corporations if the corporation
itself is assessed. Railways are taxed upon their rights of way, the charge
being one per cent, on an assessed valuation of $10,000 per mile of main
track and branches, and of $3,000 per mile of siding. Banks are subject
to a specific tax of $1,000 for each head office, plus $125 for each branch.

Unworked mineral claims granted by the Crown are taxed twenty-five
cents per acre. Coal mines and coke ovens are taxed at the rate of ten
cents per ton of output on coal and fifteen cents per ton on coke.

There are also probate and succession duties. The rate of succes-
sion duty is progressive, the upper limit being ten per cent, upon estates
of over $200,000 to distant relatives and strangers. Until recently a poll
tax of three dollars has also been collected.

On taxes assessed annually, a ten per cent, rebate is made if the taxes
are paid before June 30th.

(1) Ibid., s. 2.

(2) Year Book of British Columbia, p. 283.


The results of the provincial assessment of 1913 are presented in the
following table:


Assessed Values. Tax Levy.

Real Property (improved) $102,838,630 00 $627,218 57

Wild Land 19,787,430 56 873,549 01

Coal Lands (Class " A ") 1,644,314 00 16,443 14

Coal Lands (Class " B ") 1,702,948 32 34,058 96

Timber Land 8,329,032 29 166,580 61

Personal Property 49,313,957 00 252,535 52

Incomes (General) 16,443,590 30 304,403 07

Incomes (Corporation) 13,492,393 10 97,625 38

$213,552,295 57 $2,372,414 26

(a) Totals, 1913 rolls. Year Book of British Columbia, 1911-1914, p. 393.

In addition to the provincial grants for school purposes local school
taxes are levied both in the municipalities and in the unorganized territory.
In the unorganized territory the amount of this tax is determined by a board
of rural school trustees in annual meetings held in the rural school dis-
tricts and is levied and collected by the provincial assessors and collectors.
The collections, however, are kept separate from the consolidated revenues
and are handed over to the local school officials. The tax base on which
the rural school rates are levied is of somewhat different composition than
that on which the provincial taxes are levied, because of the difficulties
of localizing income. This part of the base is not used for school taxes,
and some of the exemptions made for provincial taxes are not allowed in
the case of schools. This results, therefore, in the necessity for a separate
tax roll for school purposes, and in a different tax rate for each local district.

A Royal Commission on Taxation was appointed September 14, 1911,
" for the purpose of inquiring into the operation of the * Assessment Act '
with regard to its practical bearings on the financial requirements of the

This commission submitted a report under the date of January 19,
1912, which contained recommendations of great interest from the point of
view of the taxation of land values. In addition to recommending the
abolition of the poll tax and the personal property tax it suggested changes
in the income tax by giving a larger initial exemption and by increasing
the rates on the higher incomes. The commission suggested also that no
tax be levied upon improvements in any territory directly under the control
of the province for taxation purposes.

The reasons for recommending the abolition of the poll tax were that
such a tax was suitable only to a primitive condition of society, and that
it had a tendency to work a disadvantage to the province by checking the
free flow of labor. The revenue surrendered by the abandonment of the

(1) Synopsis of Report, and Full Report of the Royal Commission on Taxation
of 1911. Printed by Authority of the Legislative Assembly of British Columbia-
Victoria, B. C, 1912.


poll tax and of the tax on personal property was expected to be made up
in large part from increased receipts from the income tax. This additional
amount was to be secured in spite of the increase of the initial exemption
from $1,000 to $1,500. The rates on incomes were to be raised for those
persons who received incomes in excess of $11,500. Incomes between
$11,500 and $50,000 were to be taxed two and one-half per cent, and in
addition persons falling within this class were to be given no exemption.
Incomes exceeding $50,000 were to be taxed in the same manner, and in
addition a super-tax of five per cent, was to be imposed on that part of the
income over $50,000. Additional exemption from the income tax was
proposed to the extent of $200 for each child.

As a result of their investigation and deliberation the commission
arrived at the decision that it was good public policy that improvements
should not be taxed. Moreover, improvements were defined in the most
inclusive fashion. The following is the definition set forth in the report : ( 1 )
Improvements should include houses, other buildings, fencing,
putting in crops, planting of orchards, draining and irrigation of land,
clearing from timber and scrub, laying down in grass or pasture,
and any other improvements whatever, the benefit of which is unex-
hausted at the time of valuation.

The commission's recommendation that there should be no taxation of
improvements as defined above has raised an interesting question. The
cost of clearing land in British Columbia is very heavy, most of it being
heavily wooded. It has been pointed out by the administrative officials
that some land which cost as high as $350 an acre to clear is at present
selling for only $200 an acre; and it is claimed that the adoption of this
recommendation would mean the exemption of a large portion of land at
present taxed. There seems to be little objection on the part of the people
to the adoption of a plan to exempt structural improvements from taxation ;
but there is a strong feeling that the commission went a step too far in
defining improvements as it did.

In 1912, however, the Honorable Price Ellison, Minister of Finance
and Agriculture, in his budget speech before the legislature, announced
that the Government had decided to adopt the recommendations of the com-
mission, and outlined a plan for carrying them into effect, specifying the
exact time when the various recommendations were to be adopted.

The commission's recommendation that the poll tax be abandoned was
adopted forthwith; none of the other recommendations have been carried
into effect.

Moreover, Mr. J. B. McKilligan, the Surveyor of Taxes, has recom-
mended that no changes be made in the immediate future, and the prospects
are that there will be none. This is partly due to anxiety lest the recom-
mendations of the commission in regard to the exemption of improvements
from taxation prove unworkable, and partly due to the unsettled conditions
caused by the war.

(1) Report, Royal Commission on Taxation, p. 25.


In order to obtain an official statement of the present attitude of the
Government toward their announced program of tax legislation a request for
a statement was made of the prime minister, Sir Richard McBride. Under
date of September 4th, the following letter was received :

I am in receipt of your favor of the 2d inst. asking me to give an
expression of opinion on the question of exemptions of improvements
from taxation to the Committee on Taxation in New York City. This
request I have much pleasure in complying with.

I am sending you a report of the Taxation Commission which

Online LibraryRobert Murray HaigThe exemption of improvements from taxation in Canada and the United States [electronic resource] : a report prepared for the Committee on Taxation of the City of New York → online text (page 17 of 31)