`Zakat' becomes tax deductible from 2002

The Jakarta Post Jakarta

A tax that all Muslims are obliged to pay, zakat, will become fully deductible from income taxes as of 2002, Minister of Religious Affairs Said Agil Husein Al Munawar said on Tuesday.

The directorate general of tax has began disseminating information about the ruling to the regions, Said told reporters after meeting with Vice President Hamzah Haz.

Muslims are obliged to pay 2.5 percent of their wealth, measured in terms of both their income streams and wealth, in zakat. This is in on top of other donations they are encouraged to give to the needy.

Said said people who submit receipts of zakat payment with their tax returns would be entitled to a 2.5 percent discount from their regular income tax, which currently range between 5 and 35 percent.

Most Muslims who pay income taxes to the government currently pay the 2.5 percent zakat on top.

Various private groups administer the zakat, from local mosques to larger national organizations, collecting the money and distributing it to the needy.

Said said his office was in the process of setting up a new directorate which would handle zakat as well as Muslim charity contributions (wakaf).

Five banks have been enlisted to facilitate the payments of zakat, including Bank Syariah Mandiri, BNI Syariah and dan Bank Muamalat.

He said people seeking more information about the new regulations should contact the Ministry of Religious Affairs.

The government has also set up the National Zakat Executive Agency with 22 regional offices, and smaller branches at district level. The agency would be inaugurated by President Megawati Soekarnoputri on Dec. 3, according to Antara.

It is not immediately clear how the zakat policy will impact on the government's tax revenues. Because of the self assessment system, the majority of Indonesians do not even pay their income taxes. The government has been struggling to bolster the number of people who pay income taxes.

Muslim leaders on Wednesday praised the government's new zakat policy as a positive move expected to further encourage Muslims to pay their religious taxes.

"It will give a good future for zakat payers," said Muslim scholar Ali Yafie who was a former Nahdlatul Ulama (NU) Islamic organization law-making body chairman.

He said the tax deduction was a "good and fair step" for Muslims, as they will not necessarily pay double on their taxes.

Yafie said the policy was a follow-up implementation of the country's law on zakat and non-obligatory donations (infaq).

Asked whether the move would increase zakat payments, while there are no sanctions imposed on violators, he said: "It depends on the socialization of the policy.

"Any religious regulation should not necessarily require sanctions."