An Evaluation Of Property Tax System In Malaysia

1663 words - 7 pages

1.0 Introduction

Rapid population growth and increasing urbanization have triggers increases in demand for real property. These developments ultimate translate to the responsibility of local authority in providing facilities for the public. Therefore, local government need some sources to provide these facilities. Basically local government income comes from taxes, fees and fines. Property taxes are the largest fund and backbone of municipal finance which is used to provide amenities and services. However not all land parcels and buildings can be taxed. There are some taxable properties which are exempted by law such as non profit religious, health, education and /or social activities; wildlife reserves and forests and other protected areas; cemeteries; those related to the functioning of certain international organisation; and those related to official foreign diplomatic presence (Lewis, 2003).

Property tax is an ad valorem levy on the value of property which the owner is required to pay. In Malaysia, the assessment rates are charged according to the provision of Local Government Act 1976. This provision empowers the local authority to collect assessment rates according to the area of jurisdiction. The property tax is based on market value for the state of Johor and annual value for the rest of states in Malaysia. Most of the appraisals in Malaysia are using conventional system to evaluate the property tax. The valuation or revaluation of the property is still carried out by manual approach. This manual approach is the main reason for inefficiency and unsystematic in local government’s property tax administration. Hence, only few local authorities in Malaysia carry out valuation using computer but this valuation done manually or through computation for only one property at a time and not using mass appraisal. To overcome this problem, mass appraisal technique must be employed to appraise value of assessment systematically at a bigger and extensive level. Mass appraisal may be defined as a systematic appraisal of large group of properties as of a given date using standardized procedures (Kauko and d’Amato, 2008).

In order to handle valuation of large number of properties, the assessors must use the correct procedures which are adapted for mass appraisal use. Mass appraisal can be used with computer or without computer but through computer, mass appraisal process become more efficient and more widespread (Zhang and Chen, 2009). Therefore CAMA (Computer Assisted Mass Appraisal) system has been introduced to reduce labour cost and time. CAMA system carries out mass calculation in a stipulated time with high degree of accuracy. The advantages of CAMA system are the outcome will be more objectivity; well documented; provision for regular or annual revaluations; and improvement in fairness, equity and economies of scale (McCluskey and Anand, 1999).

The overall objective of this study aims to assess the problems faced by Local Authority...

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