1 March 2014
By A. Jeyaraj
Ipoh City Watch (ICW) organised a forum to discuss ‘Issues of Assessment Rates’ which was held at the Open University Malaysia. In his opening address, Associate Professor Dr Richard Ng, Chairman, (ICW) said that in view of the concern voiced by residents on the increase of the assessment rates for 2014 imposed by Majlis Bandaraya Ipoh (MBI), ICW decided to invite speakers from different backgrounds to speak on the issue.
The first speaker Dato’ Chang Ko Youn was the former State Exco Member for Local Council and is currently the Advisor of Party Gerakan Malaysia. He said that the sources of income for local councils are federal grant, state grant and internal sources like assessment, licence and parking fees. This income is spent on development costs and operating costs which are mainly salary for staff. The assessment is based on a percentage of the annual rental value of the property. At 16.5%, Perak has the highest rate in Peninsula Malaysia for residential property. The rates vary for different sectors. The rate is based on the valuation done in 1982. The authority to fix the rate is with the state government, pursuant to Local Government Act 1976. The local authority can carry out evaluations every five years, however, this is not done due to the high cost of doing so. He informed the gathering that during his term as Exco for Local Council he did not allow MBI to increase the rates.
Chang also said that local councils throughout the world are not financially independent and need grants from the federal government. He quoted the case of the bankruptcy of Detroit City in USA.
The second speaker was Howard Lee Chuan How, ADUN Pasir Pinji and Youth Secretary, DAP Malaysia. Howard said that the assessment rate is based on the highest and best rental value of the property and the state has the right to set the value. The rate must be fair and based on the ability of the person to pay. He queried the rationale to increase industrial property rate from 10% to 16.5%. The former Mayor has said that increase in rates would improve services, an assumption which Howard doubted.
Howard informed the gathering that as per MBI Finance Report, during 2011 and 2012, RM32 million and RM34 million in assessments were not collected respectively. He questioned whether the increase was to make up for this shortfall. Are the law abiding ratepayers being over taxed to compensate for those not paying? With the current increase in cost of living, is this the right time to increase assessment rates?
The third speaker was Burhanuddin Maamor from the Department of Valuation and Property Management from MBI who said that since assessment rates were based on 1982 valuations, they were out of date. The Local Government Act allows the state to impose a maximum rate of 35% for assessment. There are more than 200,000 properties out of which about 180,000 are residential and about 5,000 are industrial. So as not to burden the majority, the residential rate was increased by 0.5% only. He informed that in 1987 the industrial rate was reduced from 16% to 10% and now it is back to the old rate. The rates are based on built-up areas and many house owners prefer to make unauthorised extensions so as to avoid paying the council.
Burhanuddin said that MBI operates a balanced budget in that its expenditure is within its income. Due to increasing expenses, if the rates are not increased, MBI would have to close down.
During question time, an industrialist (who only wanted to be known as Lee) commented that the increase in rates is making it difficult for them to operate their business. During 2013 they received a backdated assessment while also bearing the additional cost of minimum wages. This year the tariff on electricity has gone up. Some businesses may have to close down as a result.
Chan Kok Sun, a retired government auditor said that Ipoh depends on industries for its progress and revenue. We should not kill the goose that lays the golden egg. He compared the actual assessment rate of similar terrace houses in Shah Alam and Ipoh and said that Ipohites were paying RM100 more. The rental income in Shah Alam is RM1,400 and in Ipoh RM500. Businesses should have been given advanced notice so that they can prepare their cash flow and avoid problems.
On the question of what efforts are being taken to collect outstanding assessments, Burhanuddin said that there is a special unit in his department whose staff work seven days a week to collect the outstanding amount. He added that the provision of seizing the property for non-payment is seldom enforced. Meetings are held with those who cannot afford to pay and instalments plans are worked out with them.
Burhanuddin said that the new rates have been gazetted and must be de-gazetted if they are to be revised. Participants felt this is not a problem and can be done.
When asked whether this is the right time to increase rates, Howard felt that it is not. He said that MBI must reduce wastage and be more prudent. A manufacturer cannot keep on increasing the price of his products due to the increase in manufacturing costs. MBI cannot keep on increasing their rates to cover their costs.
