ASEAN Valuers Association 17th

Pre-Congress Meeting (Pre AVA)

Prepared By :

Arridel Mindra

Indonesian Society Of Appraisers

(ISA)

The Management of Land and Building Tax in Indonesia:

A Developing Process Toward a Modern Valuation A Developing Process Toward a Modern Valuation A Developing Process Toward a Modern Valuation A Developing Process Toward a Modern Valuation

SystemSystemSystemSystem

Land and Building Tax (LBT) in Indonesia is administered by

the Directorate General of Taxes (DGT), Ministry of Finance

The valuation and administration process are the core the

activities

Intro duction

Property Law Property Law (Law No. 5/1960)

Unification and Simplication of land laws

Type of land rights.

• Freehold

• Right for commercial exploitation

• Right for constructing a building

• Right for land utilization

Problems in Indonesia:

• Majority land parcels unregistered

• Enforcement of planning permission is weak

Weaknesses of Property Market in Indonesia

Property market is insufficiently developed.

No central data base for real property transactions.

Land as tax object in terms of utility does not have a

format legal status.

Housing and Settlement Law No. 4/1992

Condominium Law No. 16/1985

Property Law, Property Market, and LBT

Historical AspectsBefore Dutch colonialism era

� Land tenure (adat law) under kingdom or village authority.

� Tax in the form of services and tributes to the King.

� Tax base calculated arbitrarily , therefore inaccurate and unfair.

Colonial era under the Dutch Occupation)

� Inaccurate and unfair e.g. assessment by village not by property

� Tax base: 20 percent of the rental value.

Rafles era

� All lands belong to the King/Queen of England

� Individuals rent every land parcel

� The rate of the rent varied from 20% to 50% of its rental value or of its production for

agricultural lands.

The independence era up to the 1980s

� Based on annual market value or rental value for urban area

� Net yield of agricultural production for rural area.

LBT is developed through a series of changes.

The Developmentof Property Tax in Indonesia

Property value (market value of Land plus Market Value of Building)

A flat rate of 0.5%

Taxable Value : 20% or 40% of market value

�Urban and Rural :

� Value at less than IDR 1 billion : 20%

� Value at IDR 1 billion or more : 40%

�Plantation:

� Land area of 25 ha or more: 40%

� Land area of less than 25 ha : 20%

�Forestry: 40%

�Mining: 40%

Untaxed property value: IDR 8.000.000

Tax bill = (Market Value - Untaxed property value) x Taxable Value x Tax

Rate

Current Tax Base

Administrator: Central Government

Responsibilities :

Data collection and Valuation

Assessment and tax bill issuance

Revenue Collection and Law Enforcement

Objection and appeal

Delivery of other services

Revenue Sharing

Shared between local and central government.

� 90% for local government

� 10% for central government

Administration of LBT

Time Series Data of Land and building Tax RevenueTime Series Data of Land and building Tax RevenueTime Series Data of Land and building Tax RevenueTime Series Data of Land and building Tax Revenue

Budget % of

Year Rural Urban Plantation Forestry Mining Total Revenue Changes

2000 267.397.701 1.084.249.881 198.752.933 132.391.047 1.879.299.055 3.562.090.617

2001 322.216.495 1.711.997.316 244.773.139 169.800.651 2.838.248.039 5.287.035.640 48,43%

2002 399.066.235 2.008.265.220 261.099.574 173.111.313 3.535.207.568 6.376.769.910 20,61%

2003 443.840.946 2.316.977.619 309.827.241 157.278.681 5.561.090.534 8.789.015.021 37,83%

2004 478.018.422 2.624.605.287 337.491.915 152.030.505 8.148.900.708 11.741.046.837 33,59%

Sector

----IDR 8 MillionUntaxed Value4

6

5

3

2

1

No

Administrator

Taxable Value

Tax Rate

Tax Base

Legal Basis

Comparative

Factors

Central Government

20% up to 100%

Fixed

0.5%

Capital Value

Law No 12/1985

Indonesia

Local Government

-

Varies

Max : 35%

Annual Value

Local Government

Act 1976

Malaysia

Local Government

Varies

Varies(Non Domestic : Poundage 0.40)

Rental Value

Capital Value

LGTA 1988

UK

Local Government

-

Varies

Based on Financial Year

1. Capital Value

2. Land Ownership and

size

Urban, Rural and District Council

Act

Zimbabwe

State

-

1. Budget

2. Fixed

1.Capital Value

2. Varied (land Value)

Local Government

Act

Australia

Comparative Property Tax SystemsComparative Property Tax SystemsComparative Property Tax SystemsComparative Property Tax Systems

Computerized data management system developed since early 1990’s referred to as SISMIOP (Land and Building Tax Object Management Information System)SISMIOP’s Characteristics:

Simplicity in Design and OperationPermanentSimultaneous and automatic information update.

Supported by:Geographic Information System (GIS) ���� for mapsComputer Assisted Valuation ���� for building valuation.

Data Management System For LBT

BASIC DATA MANAGEMENT MODULE

DATA COLLECTION

COMPONENT

MAP & FORMS MGMT

COMPONENT

DATA ENTRY VALIDATION

COMPONENT

DATA FILE MAINTENANCE

COMPONENT TAX BILL PRODUCTION MODULE

TAX BILL PRINTING

COMPONENT

RECEIPT PRINTING

COMPONENT

TAX ROLL PRINTING

COMPONENT

BILLING STATISTIC

COMPONENTVALUATION & ASSESSMENT MODULE

VALUATION

COMPONENT

ASSESSMENT

COMPONENT

VALUE & ASSESSMENT STATISTICS

GENERATION COMPONENT

PERFORMANCE MONITORING MODULE

TAX PAYMENT

MONITORING

COMPONENT

PAYMENT POINT

MONITORING

COMPONENT

ENFORCEMENT MONITORING COMPONENTINFORMATION RETRIEVAL MODULE

SYSTEM ACCESS

MANAGEMENT COMPONENT

DATA MODIFICATION &

MONITORING

INFORMATION RETRIEVAL COMPONENT

ONE STOP SERVICE MODULE

PRESENTATIONS

MONITORING COMPONENT

ONE STOP SERVICE

COMPONENT

INFORMATION RETRIEVAL COMPONENT

PROPERTY

FILE NUMBER

(NOP)

TAX PAYERS

PRESENTATIONS

FILE

SISMIOP DESIGN:

Sample of Block Map Supported by GIS

Valuation Sy stem

Mass and individual appraisal.

Mass Appraisal for standard properties e.g.

residential properties

Individual Appraisal for special property e.g.

factories, offices, etc.

Method: Cost approach.

Land valued as if vacant

Building valued based on its Depreciated

Replacement Cost

Parcels of land are grouped based on:

Similarities of land use

Availability of public facilities

Accessibility

Potential Development Values

Every group has an Average Indicated Value calculated as follows:

Firstly, transaction data are collected for a group

Secondly, every data is analysed to estimate its market value.

Adjustments are given for date of transaction and the type of

data (i.e. selling price, mortgage, or asking price).

Thirdly, estimates of market values are averaged to produce an

Average Indicated Value

Land value for every parcel within a group is the average Indicated

Value of that group.

LBT Valuation System

Land Valuation

Sample of Land Value Zone Map Supported by GIS

Using a computerised system referred to as CAV.Based on the cost approach.The cost of constructing a new and similar building (CRN) is estimated based on a model representing typical buildings.The depreciation depends on a building’s effective age, CRN/m2 and its condition.

Building Valuation

Computer Assisted Valuation (CAV)

For mass appraisal, buildings need to be categorised and standardised.Buildings are grouped into standard and non-standard buildings.The CAV is used to value the standard buildings.

� a maximum of 1000 m2 floor area or � four stories or less or � a maximum of 10,000 m2 for land area.

NUMBER OF FLOOR

1

207,000

269,000

278,000

323,000

372,000

399,000

424,000

FLOOR

AREA

1-69

70-99

100-149

150-299

225-229

300-449

450-549

>=550 436,000

2 - 4

207,000

278,000

337,000

404,000

470,000

536,000

601,000

641,000

BCT OF MAIN COMPONENT (Rp/m2) 1. ROOF

� Concrete slab Rp. 93,000/m2,

� Concrete roof tile Rp. 71,000/ m2,

� Clay roof tile Rp. 45,000/ m2,

� Corrugated eternite roof Rp. 22,000/ m2,

� Corrugated zinc roof Rp. 15,000/ m2,

2. WALL FINISHES

� Glass Rp. 122,000/ m2,

� Aluminium Rp. 60,000/ m2,

� Concrete Rp. 76,000/ m2,

� Brick Rp. 57,000/ m2,

� Timber Rp. 21,000/ m2,

� Zinc Rp. 13,000/ m2.

3. FLOOR FINISHES

� Marble Rp. 134,000/ m2,

� Ceramics Rp. 59,000/ m2,

� Terrazzo Rp. 52,000/ m2,

� Cement floor tile Rp. 28,000/ m2,

4. CEILING

� Acoustic Rp. 91,000/ m2,

� Thin plywood Rp. 38,000/ m2.

BCT OF MATERIAL COMPONENT (Rp/m2)

BCT FOR STANDARD BUILDING

Have special characters, e.g. high-rise building.Valued using a tailor-made software named BCT 2000.Building values can be updated by adjusting the cos ts of building components.Basic features:

The logical procedure and process can traced and updated;Adaptable to internal and external changes;Building cost is calculated through actual construction stages based on actual building materials.Buildings are classified into 16 types supplemented with 19 types of facilities and equipments.Building structure is divided into three components : main structure, building material, and building facilities.

Non-Standard Building

572,877

594,586

617,118

640,503

664,775

689,966

716,112

743,248

771,413

800,646

657,382

663,396

522,540

501,166

544,825

461,006

480,667

568,060

592,286

617,546

643,883

671,343

FLOOR.

NUMBERBUILDING USAGE CODE

2/9 4 5 6 7 12 13 16

1 506,944 578,332 655,286 577,269 611,189 643,913

2 522,859 622,644 592,222 616,781 660,286

3 539,275 670,351 607,562 622,424 677,075

4 556,206 721,713 623,300 628,118 694,291

5 573,668 777,011 639,445 633,865 711,945

6 591,679 836,546 656,008 639,664 730,048

7 610,255 900,642 673,001 645,516 748,611

8 629,414 969,650 690,434 651,422 767,646

9 649,175 1,043,945 708,318 787,165

10 669,556 1,123,932 726,666 807,181

Etc.

BCT 2000’s MAIN COMPONENTS (RP/m2)

One Stop Service (OSS), an all in one services under one roof.

Tax Payer Services is established to cut bureaucratic procedures, simplify payment and Integrated with SISMIOP. Main features:

Telephone Information System for information retrieval through a telephone line.

Online Payment System that provides a method of payment linked to the banking system.

Tax Payer Services

The modernisation of administration and management demonstrates a long and restless works.Future implementation of “the three valuation approaches” and increase professionalism within the valuation process.Improving property market in Indonesia through vari ous consistent policies, programmes, and actions involv ing government, private sectors and individuals.Improving the organisation’s performance by adoptin g a modern organisation system commencing in 2002.

Conclusion andFuture Agendas