A Study of Muslims’ Perceptions of Zakat as a Tax Reduction in Malaysia and Indonesia

Abstract

The study of zakat and taxes is still a highly regarded topic, especially in relation to the public’s perception of zakat as a tax reduction. The aim of this study is to examine the influencing factors towards the perception of Muslims on the zakat policy as a form of tax reduction based on an adopted research model. To assess the quality of the models and hypothesis, the Partial Least Square (PLS) - Structure Equations Model (SEM) is used in this study. There is a total of 152 respondents involved in this study whereby the respondents are almost evenly divided between Malaysians and Indonesians. The Malaysian citizens are a total of 77 people (50.7%) and the remaining 75 people (49.3%) are Indonesian residents. Based on the SEM results of the formation factors in the test produced by the method of Exploratory Factor Analysis, it can be said that only the knowledge about tax, religiosity and satisfaction variables have a significant and positive influence or impact on the perception towards tax through zakat system. The results of this study can reduce the gap in perception and understanding among the Muslim community regarding the perception of Muslims towards tax breaks through the zakat system and will surely play an important role for countries, policy makers and zakat or tax institutions both in Malaysia and Indonesia as well as around the world in utilizing practices which can be considered highly and positively beneficial to the Muslim society.