Taxing times in Selangor with assessment hike? Not really, as increase capped and exemptions planned for low-cost homes

KUALA LUMPUR, Dec 16 — After nearly three decades of dormancy, Selangor’s assessment tax rates are finally getting a revision, prompting raised eyebrows and sighs from those anticipating a tightening of purse strings.

Before anything though, let’s delve deeper into this long-overdue rate hike. Is this tax revision truly the financial spectre it’s being portrayed as?

For context, the Selangor government recently approved a 25 per cent assessment tax increase, scheduled to take effect from January 1 next year across all local councils.

Previously, an increase of over 100 per cent was proposed, and only certain local councils were going to implement it.

Several town hall sessions were organised to explain the proposed tax increase and gauge the sentiments of ratepayers.

Following these sessions, the state government announced a 75 per cent reduction in the proposed tax hike.

State executive councillor for local government and tourism Datuk Ng Suee Lim explained that the adjustment follows a mandated review as outlined in the Local Government Act 1976 (Act 171), which requires all local councils to prepare and issue a new evaluation list every five years.

However, as we examine the figures, this tax adjustment appears less of a system shock and more of a measured recalibration.

A general view of Klang October 8, 2020. All municipalities in Selangor, including Klang which last revised its rates in 1993, went decades without reassessing their property tax rates. — Picture by Yusof Mat Isa

For context, all municipalities in Selangor went decades without reassessing their property tax rates.

This long-standing stasis in tax policy spans a significant portion of the state.

See the list below:

This prolonged period without rate adjustments raises questions about the adequacy of local government funding and the potential impact of sudden updates to these long-unchanged rates.

The calculations

When viewed over the approximately 30-year period since the last revision, the annual increase beginning in 2025 is very minimal.

Here is an example of how much a two-storey homeowner in Shah Alam would have to pay in 2025:

This means the local council has capped the tax increase at RM360, aligning with the 25 per cent limit of RM72 over the 2006 tax amount of RM288.

If the increased revenue leads to improved services, ratepayers might receive more value for their money, potentially offsetting the absolute increase.

This balance between cost and service quality is crucial for understanding the full impact of the revision.

Low-cost houses, including owners of the SelangorKu homes, will be exempted from the increases, at a cost of almost RM60 million to the Selangor state government.

Ng announced that targeted exemptions will be provided for traditional village houses.

This year alone, 2,849 homes have benefited from these exemptions.

National news agency Bernama reported Ng as stating that the state government aims to extend these exemptions to 5,000 traditional houses, provided they meet the specified conditions.

Muhammad Shakir said that in Shah Alam, the assessment tax increase is capped at 25 per cent, but the Shah Alam City Council has further reduced this to 22 per cent in a recent decision. He said that the new assessment tax rates are crucial to provide better service for people’s wellbeing. — Picture by Shafwan Zaidon

Why is the increase in assessment tax more noticeable for some properties?

Several factors contribute to this, including the change in land category from vacant land to development land status, changes in land use category, the addition of structures and other factors.

“Past governments did not take the necessary action to increase the rates gradually, so when it comes to a revision in general and it’s done suddenly, of course people will not be happy about it and will be frustrated.

“In Shah Alam for example, the increase is capped at 25 per cent, but the Shah Alam City Council has reduced this to 22 per cent.

“The increase for 2025 is 3.25 per cent for houses, and 6.75 per cent for commercial properties, 7 per cent for industrial properties and 1 per cent for empty land for agriculture,” Shah Alam City Council’s councillor Muhammad Shakir Ameer Mohideen told Malay Mail.

The Shah Alam City Council’s previous rates were 4 per cent for residential properties, 7 per cent for commercial properties and 7.5 per cent for industrial properties.

“The knock-on effect is not going to be as high as feared.

“It is marginal and this is being done in the interest of the people to improve the quality of local council service and infrastructure upgrades,” Shakir added.

Likewise, the Kuala Langat Municipal Council had reduced its assessment tax rates to 3 per cent for residential properties and 4 per cent for commercial properties, down from 5.5 per cent and 14 per cent respectively.

A general view of Shah Alam with the state government administration building visible June 20, 2023. — Picture by Sayuti Zainudin

Before the decision to apply a flat 25 per cent assessment tax rate across all local councils, the Kajang Municipal Council had conducted a property valuation exercise and proposed a 20 per cent to 30 per cent increase in assessment tax based on 2020 valuations. This will be the first revision for Kajang since 1985.

To ease the impact, the proposed increase was initially planned to be phased in.

Ratepayers would pay 50 per cent of the new rate this year, with the full amount coming into effect in 2025, The Star reported.

Previously, residential properties were taxed at different rates: 5.5 per cent, 7.7 per cent and 8.8 per cent, depending on the property type.

The upcoming tax structure simplifies this by introducing a uniform 4 per cent rate for all residential properties.

Selangor Journal previously reported Subang Jaya assemblywoman Michelle Ng saying that local authorities in Selangor had also been urged to prepare a comprehensive report outlining their plans to enhance public facilities and improve service delivery once the new assessment tax rates take effect in January next year.

She stressed the importance of keeping residents informed about the improvements that will follow the tax increase.