Penang to revise land tax rates by next year

PENANG plans to implement a long-overdue revision of land tax rates by next year as it can help generate more revenue for development.

The revision marks the first adjustment since 1994.

Penang Land and Mines Office director Dr Faizal Kamarudin explained that the revision is necessary to address stagnant tax revenue, which has remained unchanged for over three decades despite a sharp rise in land values.

“Under the law, land tax rates can be reviewed every 10 years, but Penang has not conducted a reassessment since the mid-1990s.

"Meanwhile, land values have surged, with some areas seeing increases of up to 1,000%” Faizal told the state's newsletter - Bulletin Mutiara.

While this benefits landowners, the absence of tax adjustments has led to an imbalance in state revenue collection.

The review will also facilitate updates to the e-Tanah system, allowing for better tax assessment based on location, land use, and ownership compliance, said Faizal.

“One key area of concern is First Grade land, which does not require a change-of-use approval for development. Due to the outdated tax rates, these properties have been paying lower taxes than appropriate, leading to revenue leakage,” he said.

Faizal however stressed that the revision would not affect strata property owners, except for those whose land status is reclassified from rural to urban.

“The Strata Titles Act 1985 prohibits tax rate adjustments within 10 years of the last review, which took place in 2019. As a result, nearly 300,000 strata unit owners in Penang will not see any changes in their parcel tax obligations in 2026,” Faizal said.

The land tax revision would apply to all categories, including residential and commercial properties, industrial land, and agricultural areas.

“Penang currently has 373,777 registered land titles, with 194,362 classified as First Grade land, accounting for 51.99% of total land ownership in the state.

"Once the revised rates are approved and gazetted, landowners will be able to check their updated tax amounts starting Jan 1, 2026, via the PgLAND online portal or by visiting the nearest Land Office.

"Updated tax bills will be issued as usual beginning in January 2026."

Faizal said that the state is studying the range of the tax revisions to ensure that it does not necessarily burden the ratepayers here.

A spokesperson with a top developer here, has however conceded that if the costs of construction and development goes up, it would be logical for property prices to also escalate, especially in Penang where the landbank is acutely limited.

There might be spillover costs to the average taxation that a ratepayer needs to pay now, said the spokesperson, adding that it would also lead to more living costs pressure.

But it is up to the state government to decide how best to mitigate living costs, the spokesperson said. - February 6, 2025.