A research from Malaysia reveals that 80% of Muslims want zakat to be regulated like taxes, unlocking billions for poverty relief.
In theory, zakat – the Islamic obligatory alms – is a powerful engine for economic justice. As one of the Five Pillars of Islam, it requires financially able Muslims to give 2.5% of their wealth annually to eight specific categories of recipients, including the poor, the needy, and debtors. Done right, it redistributes billions of ringgit from the wealthy to the vulnerable, purifies one’s possessions, and fosters social solidarity.
In practice, however, zakat in many Muslim-majority countries underperforms dramatically. A revealing study from the International Islamic University Malaysia (IIUM) and Sultan Qaboos University, published in the International Journal of Innovation, Creativity and Change, pinpoints exactly why.
The study, titled “Zakat and Tax: A Comparative Study in Malaysia,” surveyed 50 Malaysian Muslims with knowledge of Islamic law and the country’s tax and zakat systems. The findings are both sobering and encouraging: while over 70% of respondents understand zakat’s basic rules, a staggering 80% believe zakat should be regulated under the federal constitution – just like taxes. And 78% think zakat should be a crucial element of fiscal policy, not a mere voluntary afterthought.
“The true impact of zakat on society is not visible,” the authors – Abdo Yousef Qaid Saad and Alya Mubarak Al Foori – conclude. “There is a lack of proper collection and distribution.”
The Heart of the Problem: Voluntary vs. Compulsory
At first glance, zakat is not voluntary. It is a religious obligation (fard). But in most Muslim countries today, there is no legal penalty for non-payment. Tax evasion, by contrast, can land you in prison.
This asymmetry creates what economists call a “compliance gap.” The study found that approximately 35% of respondents viewed non-payment of zakat as due to it being “a voluntary act not enforced by the government.” Another 25% blamed a “lack of regulation of the zakat institution.” And 65% felt that “people were unaware of the importance of zakat.”
In other words, the problem is not just religious apathy – it is systemic. The authors trace this confusion back to the colonial era, when Muslim countries were administered under Western legal systems that sidelined Islamic institutions. “These views have been found in Muslim countries since colonisation and have not changed so far,” they write.
Tax vs. Zakat: A Philosophical Divide
To understand why this matters, one must understand the fundamental difference between zakat and tax – a distinction that the study explains clearly.
Zakat is an act of worship (‘ibadah). It is paid to Allah, not to the state, though the state may collect it. Its rates, recipients, and timing are fixed by the Qur’an and Sunnah and cannot be changed by any ruler. Its purpose is spiritual purification and wealth redistribution.
Tax is a civil obligation imposed by the government. Its rates and uses can change based on societal needs – defence, infrastructure, healthcare, or even the ruler’s personal expenses. There is no spiritual dimension.
The study quotes the famous hadith (prophetic saying) where the Prophet Muhammad (peace be upon him) told a Bedouin man that zakat was the only obligatory payment – anything else was voluntary charity (sadaqah). Based on this, some scholars argue that no additional tax can be imposed on Muslims.
However, the study also presents a more nuanced view, citing contemporary scholars like Dr. Ali Al-Qaradaghi. They argue that additional taxes are permissible in times of genuine state need – such as when zakat revenues are insufficient to cover defence, healthcare, or infrastructure – provided that:
- The tax is not permanent.
- It is levied only on those who can afford it.
- It is distributed equitably.
- Collection stops once the need ends.
This balanced perspective opens the door for Muslim countries to integrate zakat into their fiscal systems without abandoning taxation entirely.
Key Survey Findings on Muslim Perceptions of Zakat in Malaysia
| Survey Question | Percentage of Respondents | Implication |
|---|---|---|
| Aware of general stipulations of zakat | >70% | Knowledge is not the main barrier. |
| Believe zakat should not be left to payer discretion | ~75% | Strong support for regulation. |
| Believe zakat should be regulated under federal constitution | ~80% | Desire for national (not just state) oversight. |
| Feel zakat should be a crucial element of fiscal policy | ~78% | Recognition of economic potential. |
| Believe tax cannot substitute for zakat | 85% | Understanding of unique role of zakat. |
| Believe zakat has positive impact on societal wellbeing | 100% | Universal agreement on value. |
Reasons for Non-Payment of Zakat (Identified by Respondents)
| Reason Cited | Percentage of Respondents | Encouraging Takeaway |
|---|---|---|
| Lack of regulation of zakat institution | 25% | Fixable through policy reform. |
| Zakat seen as voluntary (not enforced by government) | 35% | Changing enforcement would boost compliance. |
| People unaware of importance of zakat | 65% | Education campaigns could have major impact. |
| No proper collection and distribution process | ~55% | Systemic improvement would increase trust. |
| Lack of trust in zakat institutions | (Qualitative finding) | Transparency and accountability would help. |
The Economic Case: Zakat as Fiscal Policy
One of the study’s most powerful arguments is economic. The authors cite the work of Islamic economist M.A. Mannan, who showed that zakat reallocates idle savings back into the economy. When the rich pay zakat, that money is distributed to the poor, who spend it immediately on basic necessities. This increases aggregate demand, stimulates production, reduces unemployment, and generates economic activity.
Taxes, by contrast, often suffer from “leakage” – money collected may go toward administration, defence, or even corruption, without the same multiplier effect on the poor.
“Zakat is instrumental in stimulating the economy,” the study states. “The money that is left idle is redistributed to the economy. As a result, the general demand in the economy increases, hence stimulating economic production.”
This is not just religious rhetoric. It is sound Keynesian economics – but with a built-in moral compass.
The Distribution Problem: Who Gets What?
Even when zakat is collected, the study suggests that distribution is often flawed. The authors draw on the work of Islamic scholars like Al-Ghazali and Al-Syatibi, who classify human needs into three levels:
- Daruriyyat (Basic necessities) – food, clothing, shelter, religion, life, intellect, family, property.
- Hajiyyat (Comfort) – things that ease life but are not strictly essential.
- Tahsiniyat (Luxury/embellishment) – items that beautify life.
The study argues that zakat distribution should aim to lift recipients to at least the level of hajiyyat – comfort – not just keep them alive at subsistence level. This aligns with modern concepts of “quality of life” and “self-actualization” (Maslow’s hierarchy of needs).
In the Malaysian context, the Quality of Life Index includes self-progress, healthy lifestyle, access to knowledge, and psychological wellbeing. Zakat, properly administered, could advance all of these.
What Malaysians Want: Practical Recommendations
The respondents were not just critical – they were constructive. The study reports several practical suggestions for reforming zakat in Malaysia:
- Automatic deduction from bank accounts – Similar to how taxes are withheld from salaries, zakat could be deducted automatically. This would reduce the “voluntary” loophole and increase compliance.
- Federal regulation – Currently, zakat in Malaysia is managed by each state’s Islamic Religious Council (Majlis Agama Islam). This creates inconsistency. Respondents overwhelmingly (80%) wanted zakat to be regulated under the federal constitution, like taxes.
- Transparency in financial statements – Many respondents expressed distrust of zakat institutions. Publishing clear, audited reports on collection and distribution would rebuild confidence.
- Proper distribution to deserving recipients – Collection is only half the battle. People need to see that their zakat actually reaches the poor, needy, debtors, and other eligible categories.
- Educational campaigns – With 65% of respondents citing lack of awareness as a reason for non-payment, mass education (via mosques, schools, media) would make a significant difference.
The Colonial Legacy: Why Muslim Countries Struggle
The study does not shy away from history. It argues that the marginalization of zakat is a direct legacy of Western colonialism. Colonial administrations in Muslim countries imposed secular tax systems and relegated Islamic law (including zakat) to personal or religious matters only. After independence, many Muslim countries retained these structures.
“Zakat is not viewed as important as tax,” the authors write. “Tax is regarded as a crucial element of fiscal policy, whereas zakat is viewed more as a mere voluntary institution.”
This is not a small problem. The study notes that “many Muslim countries are faced with an increase in poverty while having good mechanisms such as zakat to reduce it.” The mechanism is there – it is just not being used effectively.
A Way Forward: Integrating Zakat and Tax
The study does not call for the abolition of taxes. Rather, it calls for a complementary system where zakat serves as a poverty-focused wealth redistribution mechanism, while taxes fund broader state functions (defence, infrastructure, administration).
Under this model:
- Zakat remains an act of worship, with fixed rates and recipients.
- The state collects zakat alongside taxes, perhaps through the same revenue agency.
- Zakat funds are channeled specifically to the eight asnaf (eligible categories), with transparent reporting.
- Additional taxes may be levied for other state needs, but only when necessary and equitably.
This approach respects both Islamic jurisprudence and modern fiscal reality. As the authors note, “zakat should be a crucial element of the fiscal policy in an Islamic state.”
The Bottom Line: Hope for Reform
The study’s findings are ultimately encouraging. Despite decades of underperformance, Malaysian Muslims overwhelmingly believe in zakat’s potential. 100% of respondents agreed that zakat has a positive impact on societal wellbeing. 85% understood that tax cannot substitute for zakat. And a clear majority wants reform – not abolition.
“The people and the governments need to better understand the importance of zakat and understand the socioeconomic problems that may arise if it is not practised as stipulated,” the authors conclude.
In an era of rising inequality, strained government budgets, and growing interest in ethical finance, zakat offers a ready-made, faith-based solution. It is not charity – it is a right of the poor. And with the right regulations, transparency, and political will, it could transform millions of lives.
As one respondent put it (paraphrased in the study): the spiritual aspects of society are crucial and should be the driving force towards obedience to Allah. But obedience is easier when the system is fair, transparent, and effective.
Reference: Saad, A. Y. Q., and A. M. Al Foori. “Zakat and tax: A comparative study in Malaysia.” International Journal of Innovation, Creativity and Change 10.12 (2020): 140-151.
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