But having pointed out the errors in Mr Nias' statements Governor Douglas considering very properly that the question raised by that Gentleman is of paramount importance proceeds to explain his own views respecting it. He states that he has always been favorable to the theory of improvement duties, and was disposed to introduce them when the rush of Emigration to Vancouvers Island first commenced. But on reflection he considered that it would be inconsistent after striving so long to promote immigration to impose a check on it as soon as it began—that it was not probableprobable that a high price of Land could be long maintained by speculators where there was so much unoccupied—that capitalists buying Land might be expected in their own interests to do their best for the interests of the Colony—that it would be difficult to define, and in the case of labouring men inexpedient to enforce, substantial improvements—and that a temporary dearness of labor and material might render such improvements impracticable. As a remedy against speculative purchasers whenever they become inconvenient he, thereforetherefore, suggests a Tax on unimproved Land.

6. I venture to think that Governor Douglas' reasoning scarcely meets the case. Whether Her Majesty's Government are entitled to interfere authoritatively with the disposal of this Land by the Hudson's Bay Company is, as I have pointed out, open to question. But it may be assumed, for the sake of argument at least, that the Company would be disposed to defer to such recommendations as the experience of H.M. Government might induce them to offer, for the management of this Land in the manner most advantageous toto the interests of the Colony. The risk then pointed out by Mr Nias and which will certainly require to be encountered, is not that ordinary Country Lands should be bought and held over by speculators, but that Town Lots and Lots having special advantages from situation or otherwise, should be so held. Lots such as these cannot under any circumstances be of great extent, and a speculation in them would not be affected by the quantity of Rural Land open for purchase in the Island. Neither would it be safe to trust to the personal interest of thethe Speculator. That interest would lead him to keep up the Land until by the improvement of the neighbourhood its value had been raised to its extreme point—but long before that it would probably have become an obstruction and nuisance to the community. In his objection to the difficulty of defining improvement duties, and to the facility with which they may consequently be evaded it is impossible not to concur. But he does not seem to have perceived that the same objection would apply to the remedy which he proposes, namely, a tax on unimproved Land. For if, as he justlyjustly states, it would be difficult to define "substantial improvements" on a Town Lot, it would be infinitely more difficult to define what amount of improvement should exempt Land from the Tax and what proof of such improvement should be furnished. It may safely be predicted that any improvement duties prescribed in Vancouvers Island would follow the same course as settlement duties in other Colonies and become deceptive or migratory.

7. Protection against the anticipated evil must be found, asas it appears to me, first in selling Town and suburban Lots by auction only, as I suggested in my report of 5th instant, and second by imposing a Tax not on unimproved only, but on all Land within the limit of the Township. I am not aware whether there is at present in Victoria sufficient population to allow of the incorporation of the Town, but whenever that can be done the municipal Authorities would be the proper persons to be entrusted with the power of Local Taxation, and if precautions were taken to restrict the franchise to resident Householders, and it were provided thatthat the Revenues raised from the Town should be expended exclusively on local improvements, there would be little reason to apprehend that speculators would find it profitable to buy up Land to hold it for any length of time in an unimproved state. But until a local municipality can be established the imposition of any Tax of this kind must remain with the central authority.

8. I have here adverted to a Tax on Town Lands only, but the same reasoning will apply to a Tax on suburban and Country LandsLands should it be found that they are bought and held in an unimproved state with a view to speculation. The imposition, however, of a general Tax on Land in a sparse population is a matter of questionable policy, as the collection of it is likely to be very difficult and to cost more than the Tax will produce.