Learning from Malaysia's Zakat Tax Rebate Scheme, Researcher: Indonesia Needs Careful Study

A researcher from the Institute for Demographic and Affluence Studies (IDEAS), Tira Mutiara, stated that several studies support the notion that a zakat tax rebate scheme encourages a surge in zakat collection. A 2021 study by Haji-Othman, Sheh Yusuff, and Abdullah in Kedah, Malaysia, found that the tax rebate is a significant determinant of compliance in paying income zakat, alongside factors such as religiosity and the service quality of zakat institutions. Tira explained that a subsequent 2024 study by Muhammad and Nor on the intentions of Muslim taxpayers to reduce tax obligations through zakat noted that the majority of respondents admitted to deliberately increasing their zakat payments as a strategy to lower their tax liabilities. This indicates that the rebate incentive indeed drives up the nominal amount of zakat paid, although the motivations are mixed between worship and pure fiscal strategy.

Malaysia is one of the countries that has long implemented a policy of recognising zakat as a tax reducer. The country began acknowledging zakat within its legal tax framework through the Income Tax Act 1967, but the scheme for zakat as a full tax rebate, rather than merely a deduction, was formed gradually. For individuals, various sources suggest its implementation began around the late 1970s and was strengthened through Section 6A (3) of the Income Tax Act in the 1999-2001 era, allowing Muslim taxpayers to claim 100 percent of the zakat paid as a direct offset against tax owed. For corporations, the scheme followed later in the 1990s, with a claim limit of 2.5 percent of total business income, unlike individuals who can offset the full amount without a percentage cap.

Tira noted that the Malaysian government adopted this approach because zakat is viewed as a strategic fiscal instrument for poverty alleviation among Muslims, while also aiming to avoid a double burden on Muslim citizens who must fulfil both zakat and tax obligations. The impact in Malaysia is evident from the increased collection of zakat through official state institutions, the State Islamic Religious Councils. However, the scheme has also drawn serious attention from tax authorities regarding the large amounts being offset, demonstrating that the benefits of such a policy are highly dependent on how well the reporting and verification systems are maintained to prevent it from becoming a loophole for pure tax avoidance.