Concept of Zakat and Tax

Zakat is the third of the Pillars of Islam and an act of worship which Muslim has to abide. It is an obligatory to the Muslim community. The purpose of zakat is to purify oneself as well as ones wealth. Zakat is simply a transfer of wealth from one to another. Basically, it is from richer to poor. Zakat is levied on food grains, fruits, livestock, gold and silver, and movable property, while in ones possession. Any avoidance of paying zakat draws strong condemnation by the Quran. Allah has said in the Quran: And there are those who hoard gold and silver and do not spend it in the way of Allah, announce to them a most grievous penalty (when) on the Day of Judgement heat will be produced out of wealth in the fire of Hell. Then with it they will be branded on their forehead and their flanks and backs. (It will be said to them) This is the treasure which you hoarded for yourselves, taste then the treasure that you have been hoarding. (Al- Quran 9: 34-35) On the other hand, tax is simply a governments revenue enhancement. It is a charge imposed by government on ones income or property. There are two types of tax, direct and indirect taxes. The former is the tax imposed on personal or corporation income and paid directly by people whom the tax is imposed. Income tax and corporate tax are examples of direct tax. The latter, on the other hand, is charged to consumers when they buy goods and services. It is paid by end users who bear the ultimate economic burden of tax. Examples of direct taxes are sales tax, services tax, excise duty, and import and export duties. Basically, the main purpose of the imposition of tax is to generates revenues use to cover expenses incurred by the government to encourage general welfare of its citizen. Other reason of the imposition could be to fairly distribute to the wealth of the country, to protect new industries and local producers. Moreover, tax is distinguished from penalty as tax is imposed to generate income, while penalty is created to regulate misconduct. However, penalty will be charged to those who fail to pay taxes on time or late payment.

References i. TECHNICAL COMPARISON BETWEEN BUSINESS ZAKAT AND TAX ON BUSINESS INCOME IN MALAYSIA, by Rohila Awang & Mohd Zulkifli Mokhtar, Faculty of Management and Economics, University Malaysia Terengganu, 2011, p 14 ii. ZAKAT: UNRESOLVED ISSUES IN THE CONTEMPORARY FIQH, Dr. Monzer Kahf, January 1989, p22 iii. ZAKAT IN MALAYSIA-PRESENT AND FUTURE STATUS, Nik Mustapha bin Hj. Nik Hassan, Kulliyyah of Exonomics, International Islamic University Malaysia, AugSept 1987, p29 iv. v. www.quransmessage.com www.moneycontrol.com