The administration and imposition of Zakah as a viable alternative for the individual income tax in Malaysia

Abstract

The administration of zakah in Malaysia is put under the jurisdiction of each state which has resulted in the non-uniformity in the laws and regulations thereto. This non-uniformity together with other problems such as ineffective penalties, the non-existence of meaningful enforcement, the different interpretations and focus given to the types of wealth subjected to zakah and the different interpretations given to the beneficiaries of zakah has prevent this unique system from achieving its objectives properly. Therefore, this thesis tries to find ways to solve these problems. In doing so, a qualitative approach will be applied. This qualitative study, combines the historical methodology, comparative methodology and analytical and critical methodology. The historical methodology is used to explore how zakah was administered in the early day of Islam and its development in Malaysia. It is also used to highlight changes that occur in rules and regulations related to zakah, especially that relates to the wealth subjected to zakah from the days of the Prophet to our present day. The comparative methodology is extensively utilised in revealing differences and similarities between the Islamic system of zakah and the Malaysian individual income tax. Regarding to the analytical and critical methodology, it is used to identify the problems that occur in the administration of zakah in Malaysia and to suggest the best solution for it. For this qualitative research, the data collection depends largely on the library research, where comprises of extensive literature in form of textbooks, articles, seminar papers and relevant statutes are referred to. Reference will also be done to the statistics and economic reports from relevant authorities. Information is also obtained from interviews. At the end, the study concludes that the administration of zakah need to be refined and the most important step that can be taken is to place the administration of zakah in Malaysia under one authority without ignoring the jurisdiction of each state. It is also proven that the Islamic system of zakah can be introduced as a viable alternative for the individual income tax imposed on the Malaysian Muslims. However, this possibility must not be looked from a segmented point of view. Several other supporting system, mechanism and crucial steps must be taken before this approach can be applied. It is hoped that the findings of this study would serve as a useful foundation not only to enhance the administration of zakah in Malaysia but also in introducing the Islamic taxation system as a whole in our multiracial community.