www.theinternationaljournal.org > RJSSM: Volume: 03, Number: 03, July-2013 Page 208 An Overview of Factors Affecting Property Tax Revenue Generation in Local Governments in Malaysia Muhammad Akilu Umar, Rozilah Kasim & David Martin Faculty of Technology Management and Business Universiti Tun Hussein Onn Malaysia, 86400, Parit Raja, Batu Pahat, Darul Ta azim, Johor, Malaysia. akilumuhammad78@gmail.com, rozilah@uthm.edu.my, martin@uthm.edu.my Provision of facilities and delivery of strategic services to improve the quality of life the people living in the sub-urban communities is an imperative issue to municipal councils. However, property tax revenue generation is affected by certain factors, which tend to have an effect on the amount of property tax revenue generated. The aim of this paper is to review the factors, which affects property tax revenue generation. On the other hand, the taxpayers are very observant, if there are no commensurate provisions of facilities and services they avoid paying the property tax with the believe that, the revenue generated is not effectively utilized. Therefore, key to improving the property tax revenue generation is by resolving these issues, which will inevitably promote regional development. Keywords: Property Tax, Facilities and Services, Revenue Generation, Public Goods, Tax Compliance. Introduction Local governments serve as a link between the government and the people living in rural communities in terms of public goods delivery. Goods produced by the government are referred to as public goods; these goods can be used up by more than one person, it is produced for the benefit of the society (Miller, 2006). Some public goods are excludable, while others are non-excludable (Miller, 2006). Excludable public goods are those that people can be able to exclude themselves from using them, like roads and schools. One can choose the roads to used or to avoid, school to take your children can also be selected but a person cannot avoid non-excludable public goods like services: environmental waste control, defense, waste management, landscaping. These are mostly strategic services offered by the public authorities using the revenue generated from property tax. The revenue generated from property tax is used in the delivery of basic infrastructures like electricity, water supply, environmental waste management, pollution control among others. Thus, it is anticipated that local governments is to generate funds to foster growth and development to complement constitutional allocation (Kuye, 2002). However, if the generated revenue from property tax is not prudently utilized in providing efficient public goods, this tends to create tax resistance. Fjelstad, (2001) has summarized the reasons for resistance from taxpayers as; i) Taxpayers see few tangible benefits hence property tax perceived to be unfair. ii) Poor development activities iii) Absence of public service and enforcement increase tax resistance. In a municipal area where taxpayers are observant it is imperative for the local government to step-up their services and infrastructural provision to the community in order to create a tax friendly environment. An Overview of Property Tax in Malaysia Property tax is imposed to finance the construction and maintenance of public facilities such as public toilets, bus stops, children's playgrounds, parks, public places, construction and maintenance of infrastructure such as roads, sewers and drain, provision and maintenance of street lights. Mohamed (1998) support this and states that the major functions of Malaysia local authorities can be summarized as environmental, public, social and developmental. The Local Government Act of 1976 provides local