A uniform tax of one penny in the pound sterling, equivalent to one two-hundred-and-fortieth part of the capital value of all land in the country held in freehold by Europeans, was imposed, the value of improvements being in all cases deducted from such valuation. Each owner of land is, however, allowed an exemption of land to the value of two thousand five hundred dollars, on which no tax is payable, as well as of all mortgage money secured on the freehold. Thus all freehold lands held by any individual are liable to be taxed above the value of $2,500, so far as he is really interested in them; while all money lent on mortgage of land is subject to a tax of five per cent on the annual interest reserved by the terms of the mortgage. New Zealand is mainly a country of small holdings, and the result of this system has been that, out of about 90,000 holders of land in freehold, only about 13,000 actually pay the tax on land. In other words, the settlers of the colony who own land which, apart from improvements and mortgage debts, is worth more than $2,500, are found to be only about one-seventh of the whole number. To provide for the discouragement of land speculation on a large scale a further provision is made by the enactment of a further tax upon all lands held by individuals or corporations of a value exceeding $25,000 clear of incumbrance. This is called the graduated land tax, and provides for a farther taxation on all such lands, beginning at one-eighth in addition to the original tax, and rising by advances of an additional eighth for each sum of $25,000 at which the land is valued, until a maximum rate of three times the original tax is reached in the case of large estates. To provide for the risk of vexatious opposition to valuations on the part of owners, there is a farther provision that the government may at its option elect to purchase, at an advance of ten per cent over the valuation objected to, any unimproved land held in freehold. It is also a part of the system that the government may compulsorily purchase at a valuation any lands not in actual use in case any association of persons shall apply to have this done, undertaking satisfactorily to take the land upon its purchase under the conditions of perpetual lease, which of course includes subdivision into small areas, with residence and improvement. By these means the people of New Zealand confidently expect to secure the subdivision of the lands of the country into small areas; to discourage to the utmost the holding of land by capitalists in expectation of greatly increased values at the expense of the less wealthy classes; to render practically impossible the establishment on any extensive scale of private landlordism in respect of agricultural lands; and gradually to substitute, as far as possible, the payment to the state of a yearly interest on value, for the purchase of the freehold in the land of the country.