Friday, 20 December 2013

DBKL Assessment - Facts, Fallacies and The Bottomline

Ever since Dewan Bandaraya Kuala Lumpur (DBKL) announced the higher assessment value, many commentaries have been made and some appear to be intentionally deceitful. I have also written fairly extensively on why it is not justified. 

With DBKL having just announced a reduced assessment RATE, and sticking to higher assessment VALUE previously decided, what is the bottomline effect for you? In other words, how much more do you pay in actual assessment TAX? 

I hope this article will help provide further clarity for you. 

A. DBKL's total expenditure and revenue 
2013 Budget figures*
Total Revenue        RM1,690.00 mil
Total Expenditure  RM2,190.00 mil
- Operational         RM1,406.00 mil
- Development      RM  782.55 mil 
Source : DBKL Budget Speech 2013

B.   Total Assessment Tax Collections (Before and After Revision)




The estimated revised assessment tax collections amount to RM1,430 mil compared to RM880mil currently.  This represents an increase of 62.5% or RM550mil more. DBKL should disclose the exact figures, but we believe our estimations are reasonable.

C.   The Assessment Rate
Revised Assessment Rate
Property Type
Within 36 miles radius
% of reduction
2013
2014
Commercial
12%
10%
16.7
Service Apartment
10%
7%
30.0
Residential
6%
4%
33.3
Low cost flat
6%
2%
67.7
Vacant commercial land
10%
7%
30.0
Vacant residential land
7%
5%
28.6
Kampung Baru, Kampung
2%
1%
50.0
Sungai Penchala & Kampung



Melayu Segambut Dalam




What is the basis for the different percentage of reduction of the assessment rate for the various property types and locations? If the intention is social inclusion to assist the lower income group, it would have been easier to give a further discount to the assessment rate base on income reported on tax returns. A billionaire who lives in a designated area with low assessment rate pays low assessment tax even if he has a palatial home. 

D.   How does the new assessment rules affect you?


Whether you pay more or less depends on the relative changes to your assessment value and your assessment rate, as per the formula above.  In general, most people will pay a higher assessment tax as the rise in assessment value is greater than the fall in assessment rate.
With DBKL getting RM500m to RM600m more, who pays?
Is this pain fairly spread out? 

E.   Illustrations of the above and its effect based on 3 scenarios on a residential property


F.    Conclusion
To address the unhappiness of Kuala Lumpur residents, we hope DBKL will provide further clarity and transparency on the following questions :-
a)    How much more assessment tax revenue will DBKL get after the revised assessment value and rates?  How will this additional collections, which we estimate at over RM500 million, be spent? Tax payers have the right to demand accountability and responsibility. As I have written in previous articles on this issue, DBKL is already spending more than other municipalities per person.
b)    What is the basis of computing assessment value? I know it is rental income (implied or actual) but what are the reliable sources of information or database used? DBKL should make the entire list of assessment values for all properties in KL available on the Internet. This will allow every resident the ability to check their assessment value against all others, in the interest of fairness and transparency. 
c)    A failure to be transparent would likely give the impression of possible biases in the way assessment values are determined, leading some residents to feel they are being penalized for choices they previously made.

3 comments:

  1. The new assessment will only burden the ppl much further . Even though property value may have increased over past 20 years but the value is lock in the property itself and owner have no additional income or cashflow to pay for this huge increase if it's base on sudden jump in valuation . I think Dbkl is using the ppl money to pay higher salary for themselves . Or under instruction from some party to punish the voters. A more proper
    way is to tax base on income and the number of property that one have . Some ppl with 30 to 200 properties and above for example shld be tax more versus someone who have one or two property. End of the day , there are already many duplication in taxes . Instead of collecting tax at the federal level , now the local council also want to made it and start taxing ppl.

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  2. Coming towards year end . It will be interesting to see if on the very last day , certain stocks are pushed up , so that it will appear as if the fund manager is performing . Most fund mgr losses money. Very seldom can see a warren buffet or Peter lynch. our local "fund" mgr can be as terrible as retail investor and their bonuses is tie to how the share perform . Some of them may take this chance to artificially bump up the price of the stock which they r holding or do some last minute switch so that the investors won't know the donkeys mistakes these find mgr made . Is there a way to track down these cheaters & penalized them ? Else our market is again really as artificial as breast implants whereby any body given the post and trading limit can play with stocks to make as if they gained in a not so inspiring year. Throughtout the year fund mgr which for example bought parkson share (for example) is gone or in the process bringing investors trusted them with their money to holland. Since parkson continue to drop , is there some fund mgr trying to offload so it won't appear a significant holdings in their books and they can get their fat bonuses and fund mgmt fee ?

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    Replies
    1. Yes, it does appear there is a little year end push this year. Perhaps overall for 2013, the stockmarket has underperformed. This is especially obvious in the case of Tenaga.

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