Shake-up needed over valuations, rate collection

PUBLISHED : Thursday, 26 November, 2009, 12:00am
UPDATED : Thursday, 26 November, 2009, 12:00am

A case in which rates and government rent had not been paid for 20 years and another where a development site valuation was delayed for 10 years were highlighted in an audit report on the Rating and Valuation Department.

The report, which criticised the department for slow collection, undervaluation and a backlog of assessment, said outstanding rates and government rent stood at HK$183 million at the end of March.

This included HK$87 million that had been outstanding for more than two years.

Write-offs of rates and government rent, which occur when all recovery actions have proved fruitless, amounted to HK$1.04 million in 2008-09.

Director of Audit Benjamin Tang Kwok-bun advised the department to follow up long-outstanding cases and check whether defaulters owned other properties. In 11 cases, the defaulters had sold the properties for which rates or government rent was outstanding.

Many properties had been undervalued. The ratio of rateable value to rent - known as the RV/rent ratio - for 16 out of 18 property groups analysed by auditors fell below international standards.

The International Association of Assessing Officers has specified that the acceptable range of the mean RV/rent ratio, a common gauge of valuation accuracy, is 0.9 to 1.1. But the mean RV/rent ratio of 0.83 for 2009-10 is 7.8 per cent below the lower end of the acceptable range, while the ratio of 0.897 for 2008-09 is slightly below the lower end.

The 7.8 per cent difference could mean huge losses to the government, which collected HK$7.18 billion in rates and HK$5.94 billion in government rent in 2008-09.

Tang advised the department to review the process of valuing the 16 property groups and bring its valuations in line with international standards.

Commissioner of Rating and Valuation Mimi Brown Tsang Mui-fan agreed, saying the department recognised that valuation accuracy was crucial.

For a new property or a newly granted land lease, the department should make an interim valuation, the report said.

But there was a backlog of 22,000 unassessed rural lots at the end of March.

Tang urged the department to finish assessing the rural properties as soon as possible.

Brown said the department aimed to complete assessing all the remaining lots by 2014.

Auditors looked into 10 cases of interim valuation of development sites and found that in four cases, the department took between 29 and 77 months to complete the valuations.

Home truths

The audit report says many properties are undervalued, which affects revenue

The amount, in HK dollars, collected in rates in the 2008-09 financial year: $7.18b