Privy Council considers merits of two systems for valuing land
for taxation purposes
In the case of The Legal Representative of
Succession Paul de Maroussem v Director General,Mauritius Revenue
Authority (2011)UKPC 30 on appeal from Mauritius, the Judicial
Committee of the Privy Council considered the relative merits of
valuing land for the purposes of taxation of the gain using the
'comparables' method and the 'residual' method.
The higher the value, the lower the figure for
tax. The Government's valuer had used the comparables method
starting with the value for each transaction and adjusting it to
allow for differences in the characteristics of the property and
the date of the transaction. He arrived at a figure of
RS 33,750,000. The tax payer's valuer had used the
residual method starting with the actual amount received for the
sale of each particular plot. He then deducted the actual
cost of infrastructure, land transfer tax and the developer's
profit. He did not allow for any risk factor as all the plots
were sold over the course of one weekend. He arrived at a
figure of RS 72,147,545. The tax payer argued that the
Assessment Review Committee had erred in law by accepting the
comparables method.
The Board concluded that there was no basis
for regarding the comparables method as inappropriate since actual
comparables were available. They decided that the residual
method was less appropriate as it required more speculation about
future events than the comparables method. Further in
this case the tax payer's valuer had employed hindsight which was
an erroneous way of applying that method.
The Board concluded that there was no error of
law in the decision of the Supreme Court of Mauritius accepting the
comparables method.
Blake Lapthorn acted as Privy Council Agents
for the tax payer.
