Chapter 8: FINANCES OF LOCAL AUTHORITIES IN MALAYSIA

8.1 Definition of Financial Autonomy

Ability of local government to raise enough revenues from the local economy and then
to determine how to spend those revenues.

8.2 Local Government Sources of Revenue

5. Car parking charges, 6. Loans (from
1. Assessment rates 4. Government planning fees, higher
(land-based sources of 2. Licenses 3. Rentals Grants compound, fines and government and
revenue) interests. financial
institutions)
Lesen Dewan Road
Bandaraya Kota Rent out market maintenance
Kinabalu; areas & grants
community hall for Loans for
• Undang-Undang events such as operating
Kecil (Premis Chinese New expenditures & to
Makanan) Kota Year, kaamatan finance capital
Kinabalu, 1966 festival & bazaar projects
· Undang-Undang Ramadan month.
Kecil (Dobi) Kota
Kinabalu, 1966

8.3 Assessment Tax

8.3.1 Definition of Assessment Tax
known as assessment tax/property tax imposed on owners of land, buildings or houses with the local authority area.
8.3.2 Problems dealing with Assessment Tax
1. Assessment tax is inelastic since it is land based
2. Assessment tax can be revalued once in 5 years and only with approval of state government. Maximum
that can be levied is 35%. It is difficult to increase the rates due to opposition from the public and higher
levels of government
3. A lot of unnecessary expenditure such as spending a lot of money on landscaping, building markets
without getting the approval from public
4. Local authorities have to provide better and more sophisticated services to the people
5. Smaller councils have no way to increase their autonomy since they are not in a position to get loans.

8.4 Financial Challenges Faced by Local Government

1. Minimum services provided by local authorities and not aware of LG functions
2. Collection methods by local authorities are ineffective and not up to date
3. Lack of personnel and enforcement rating regulations
4. Lack of knowledge and information of rates assessments
5. High cost of collecting rates in the rural area

8.5 Financial Challenges Faced by Local Government

1. Become more business oriented and try to join venture with private sector organisations
2. Proper record keeping of accounts and proper auditing procedures
3. Acquire loans from financial institutions to undertake any projects and business undertakings that they
want
4. Having multiple access points for people to pay taxes