Challenges In Zakah Collection: In Case Of Business Zakah Payers In Selangor

Abstract

This paper focuses mainly of business zakah and the persistent issues revolving around the collection of business zakah and the potential of collecting more of it in Malaysia. The overall business zakah collected is considered low and small as it encompasses only 19.4% of the total amount of zakah collected. This is far lower in comparison to business tax collected by the Inland Revenue Board (IRB) which makes up about 52.3% of the total tax collection. Until today, the imbalance in the collection of zakah from businesses has yet to be explained and this may affect the potential of the business zakah collection in the future. Hence, this study was carried out to identify the challenges of business zakah collection and recommendations to rectify this issue. The study was conducted through a Mini-Focus Group Discussion (M-FGD). This study identified three challenges; namely: (1) Business owners’ knowledge on business zakah , (2) The relationship between business owners and authorised zakah institutions, and (3) Financial records of business. This study has concluded that the business zakah affairs in Malaysia have not reached a level that can be considered as complete and excellent.

Keywords: Business zakahzakah collectionzakah administration

Introduction

Zakah in Islam is a mandated responsibility to those who are able and given the alms-giving for the justice and guaranteed social stability (Abdul Muhaimin, 2009). It has a significant role in developing the economy and society (Abdul Muhaimin, 2009). Zakah is not just a religious obligation, but also a financial obligation and as such, portrays one’s relationship with their creator, and with the society (Abdul Muhaimin, 2009).

Zakah shall be issued by the eligible payer to the authorised zakah institutions to be distributed to the entitled recipients (Abdul Muhaimin, 2009). In Malaysia, formal institution responsible for managing and collecting Zakah is the State Islamic Religious Council (SIRC) (Azman, Mohammad, & Syed Mohd Najib, 2012; Sanep, Hairunnizam, & Adnan, 2006).

The national law provides that zakah should be paid to the SIRC, or to the zakah authority bodies that have been appointed (referred to as an ‘Amil’ ) to receive the payment of zakah (Siti Mashitoh, 2007). Therefore, zakah payments to other parties are deemed contrary to the existing law, although direct payment of zakah to recipients by the payer is not contrary to the Islamic Law (Siti Mashitoh, 2007). In order to maximise the efficiency of zakah collection, the SIRC had established and privatised various institutions (Azman et al., 2012), which are fully mobilised to create awareness among zakah payers in Malaysia. In 1991, Kuala Lumpur Federal Territory Zakah Collection Centre became the first zakah collection institution to be privatised. Currently, it is known as ‘Pusat Pungutan Zakat Wilayah Persekutuan (PPZ WP)’ (Abdul Halim, Rawi, & Sulaiman, 2011).

Consequently, the move to establish and privatise the zakah collection centres is gradually followed by other states in Malaysia In 1994, the states of Selangor and Pulau Pinang established their zakah collection centres under the names ‘ Pusat Zakat Selangor (PZS)’ and ‘ Pusat Urus Zakat Pulau Pinang (PUZ PP)’, respectively. Pahang established their ‘ Pusat Kutipan Zakat Pahang (PKZP)’in 1995, while ‘ Pusat Zakat Negeri Sembilan (PZNS)’ was established by the state of Negeri Sembilan three years later in 1998.

Currently, all states in Malaysia have institutionalised and privatised their collection centres. They are authorised bodies and subsidiaries of the SIRC (Azman et al. 2012). The establishment of the authorised zakah institutions showed a significant rise in the amount of zakah collected by the states in Malaysia (Sanep, Hairunnizam, & Adnan, 2006).

Problem Statement

The effectiveness of zakah collection by the authorised zakah institution is proven and recognised. According to Major General Dato Seri Khir bin Haji Baharom, a Minister in the Prime Minister Department, there was an increased awareness among Muslims in Malaysia towards the obligations of paying zakah . This was evidenced by the 26.71% increase in the zakah collection amount from RM1.2 billion in 2009 to RM1.5 billion in 2010. Of this figure, the state of Selangor recorded the highest number of business zakah payers in Malaysia (Norazlina & Abdul Rahim, 2011).

In the state of Selangor, the total zakah collection continued to increase. In 2015, Selangor recorded a total zakah collection amounting to RM626.6 million, from RM582.3 million in 2014. However, only about 19.4% of the total collection or RM117.2 million was derived from business Zakah . This amount is considered low as compared to the total collection of zakah (Mohd Rahim, Ariffin, & Abd Samad, 2011; Ram Al Jaffri, 2010; Halizah, Kasumalinda, & Agoos Munalis, 2011).

The amount of business zakah collection was compared to the amount of business tax collected by the Inland Revenue Board (IRB). In 2014, IRB reported a total tax collection of RM133.7 billion, of which RM69.95 billion was collected from businesses, representing 52.3% of the total tax collection. This figure is considerably higher, compared to the proportion of business zakah of the total zakah collection, which only made up 19.4% of its total. This situation should not happen because the business zakah should be one of the main contributors to zakah collection (Mohd Rahim et al., 2011). Therefore, the authorised zakah institutions in Malaysia still need to work on improving the collection of business zakah (Halizah et al., 2011).

Mohd Rizuan (2015) has conducted a research on the issue of business zakah collection, the author found that the respondents (accountants or as zakah agents, business owners, management of zakah institutions and researchers in business zakah ) agreed that the standard operating procedures for the business zakah payment is less flexible and less consistent as compared to the business tax and the respondents recommended for further improvement. This is due to business owners paying business zakah individually to take advantage of tax rebate. In addition, some companies established an internal committee to calculate and distribute zakah directly to asnaf , instead of making payments through the authorised institutions. The discussion, however, did not provide a solid conclusion as to the reasons for the gap occurred;

Research Questions

• What are the challenges faced by the business zakah payers in Selangor?

• What are the suggestions to overcome such challenges by business zakah payers in Selangor?

Purpose of the Study

This paper intends to identify the challenges against the potential of business zakah collection in Selangor, the state with the highest zakah payers in Malaysia. The formula to overcome the challenges from the perspective of business owners are drawn at the end of this study. This may indirectly help the authorised zakah institutions to revise the existing practices and may be utilised as a guide for further improvement.

Research Methods

This study conducted a Mini-Focus Group Discussion (M-FGD) with four Muslim business owners’ in Selangor. It intends to understand the issue from the perspective of the business owners, who are also the business zakah payers. Previous studies on zakah were less focused on this method in identifying the challenges for business zakah . However, Baker and Edwards (2012) stated that Focus Group Discussion is the correct approach in collecting information is very important in order to have sufficient data that is unique and cannot be compared with other cases but researchers found out M-FGD is more appropriate because the topic need to be explored in greater depth and where participants have long and substantial experiences to be shared with the group as stated by Anderson (1990).

In ensuring appropriate selection of the respondents, they must fulfil a list of criteria that was set and agreed upon, in which the participants must: (a) have experience in dealing with business for more than 10 years, (b) already have an established business, and (c) zakah payers and have knowledge in dealing with business zakah . In addition to the sharing experiences pertaining to the business zakah payments or transactions, participants were encouraged to provide comprehensive inputs that might be useful to the study.

Findings

The M-FGD was held on Saturday, January 9, 2016, at 10.00 a.m. at Bangi-Putrajaya Hotel, Putrajaya with four respondents. All four respondents have had business experiences ranging between 15 to 25 years. The respondents were also zakah payers and have extensive experiences in dealing with the payment of business zakah. The identity of the respondent and business background are kept confidential to protect the good name and privacy of the respondents. All the feedback received was recorded for analysis. Table 01 shows the background of respondents. Two respondents were involved in the services industry and another two were in the manufacturing industry. The business size for all respondents is medium. They have engaged in the business for more than 15 years and they were business zakah payers in Selangor.

Various issues related to the collection and distribution of business zakah had also been raised in the discussion. A detailed analysis is presented in the form of three major factors: (1) business owners’ knowledge of business zakah , (2) The relationship between business owners and the authorised zakah institutions, and (3) Financial records of businesses. Findings from the discussion highlighted specific recommendations that require action and cooperation from various parties to increase the number of business zakah payers in the future.

Conclusion

The issue on zakah is never-ending. This is the law of God and it should always be remembered as one of the missionary practices in Islam. Business zakah affairs in Malaysia have not yet reached a level that can be considered as complete and excellent. There are challenges that impede the collection of business zakah, which still occur in various states in Malaysia. Authorised zakah institutions may educate the business community to improve their understanding on the concept of blessing and the importance of business zakah so as to attract more businesses to come forward and pay business zakah. The transparency and effectiveness of the zakah distribution raise the confidence of business owners with the country’s management of zakah, and solidify their intention of paying business zakah. Apart from that, complete financial records that are organised and up to date will lead to an increase in the collection of business zakah. Therefore, the authorised zakah institutions shall look further into business zakah and be mindful of the factors that contribute to the increased in the level of readiness and comfort of business owners with respect to the manner and method of calculating the business zakah.

Acknowledgments

We would like to thank to Tabung Amanah Zakat Uniten, Universiti Tenaga Nasional, Malaysia for the fund granted. We hope this may assist to improve the business zakah collection in Selangor, Malaysia.

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