Making stamp duty self-assessment more efficient

THE introduction of the stamp duty self-assessment system on Jan 1 this year was an important step towards modernising tax administration in this country.

It was designed to improve efficiency, reduce processing time and place greater responsibility on taxpayers and practitioners. However, as with any system that relies heavily on self-declaration, its effectiveness ultimately depends on the strength of its safeguards.

One area that deserves closer attention is the valuation of property transactions, particularly whether independent valuation reports should be made a mandatory requirement in stamp duty submissions.

At present, stamp duty is generally assessed based on the higher of the transaction’s consideration price or market value. In theory, this ensures fairness and protects government revenue. In practice, however, the reliance on declared sale and purchase agreement (SPA) prices creates room for under-declaration.

In some cases, property values are intentionally stated below market levels in order to reduce stamp duty exposure. While not universal, this practice undermines the integrity of the tax base, creating inconsistencies in valuation reporting across the market.

Under a self-assessment system, this issue becomes more pronounced. Since taxpayers and their advisers are responsible for declaring the correct value, the Inland Revenue Board (LHDN) is often placed in a position where it must verify compliance after submission.

This reactive approach can lead to inefficiencies, as discrepancies are only identified during audits or post-submission reviews.

When undervaluation is detected, it may result in reassessments, disputes and delays, all of which increase administrative workload and reduce overall system efficiency.

The burden of these processes does not fall on LHDN alone. The Valuation and Property Services Department (JPPH) is frequently called upon to provide valuation references or confirmations when disputes arise. This creates additional pressure on valuation officers and can lead to bottlenecks, especially when dealing with high transaction volumes.

In effect, the system generates avoidable downstream work that could have been mitigated at the point of submission.

Introducing a requirement for independent valuation reports in stamp duty self-assessment could help address these challenges. A professionally prepared valuation provides an objective market benchmark at the outset of the transaction.

This reduces the likelihood of undervaluation, strengthens compliance quality and improves the reliability of declared values. It also shifts verification from a reactive to a preventive approach, ensuring that potential discrepancies are addressed before submission rather than after assessment.

From an administrative perspective, such a requirement could also ease the workload on JPPH and LHDN. Instead of spending resources on reassessing or disputing declared values, these agencies could focus on higher-risk cases and policy-level enforcement.

Over time, this would improve efficiency, reduce delays and enhance the overall effectiveness of the tax system.

Concerns about increased transaction costs and procedural delays are understandable. But in many cases, property transactions already involve valuation reports for bank financing purposes.

Formalising this requirement for stamp duty purposes would therefore not introduce a fundamentally new burden but rather align tax compliance with existing market practice.

Moreover, the cost of a valuation report is relatively small compared to the potential loss of tax revenue arising from undervaluation or the administrative costs of dispute resolution.

DR THAM KUEN WEI

TAR University of Management & Technology

Kuala Lumpur