The collective responsibility of taxation
In recent weeks, taxation has become a hot topic in Malaysia, with the announcement of the expansion of the sales and service tax (SST) beginning 1 July 2025 to include six new sectors: construction services, financial services, private healthcare, private education, beauty services, as well as leasing and rental services. It highlights the impact of taxation in our daily lives and how it is being used to govern a nation. How Islamic are taxes? Let’s explore the Islamic views on taxation.
Key Islamic Rulings and Types of Taxes
Taxation is not a new concept in Islam and has been practiced since the early era of Islam. Here are notable types of taxation in Islam:
1. Zakat
As one of the five pillars of Islam, it is easily the most recognisable and applied form of taxation in Islam. Zakat harta mandates a 2.4% tax on wealth for eligible Muslims, with the aim of redistributing wealth to the poor and other beneficiaries. Additionally, zakat fitrah is a small levy that must be paid by all Muslims annually during the month of Ramadan.
2. Jizyah and Kharaj
These two taxes were the largest source of income for Muslims during the early era of Islam. Jizyah had been applied to since the years of the Prophet Muhammad’s leadership in Medina, referring to the tax which must be paid by non-believers who are citizens of an Islamic state. Meanwhile, kharaj is a land tax that was introduced during the era of Umar bin al-Khattab.
Taxation is relevant even for Islamic nations, but the key here is the fact that Islamic taxation is rooted in Shariah principles that emphasise justice, equity, and the welfare of society. It mandates each member of the society to realise the concept of collective responsibility to ensure the social and economic well-being of the society and the nation. Paying taxes, therefore, is an extension of our responsibility that aligns with Islamic teachings.
Taxation in the Malaysian Context
Malaysia uses a dual system approach for taxation, combining Islamic taxes (zakat) with conventional taxation such as SST. The government balances religious obligations with fiscal policy, ensuring alignment with Islamic principles. While there are plenty of reminders for zakat fitrah during Ramadan, awareness of zakat harta or earnings is less prevalent. For Malaysians, this zakat on earnings may also include gold and silver, savings, EPF, as well as farming and livestock.
Zakat in Malaysia is managed by state religious authorities, who are also responsible for setting the minimum threshold subject to zakat. Annuals fatwas are issued to determine the zakat fitrah and the nisab of zakat. In Malaysia, zakat is also deductible from your annual income tax.
Conclusion
Paying taxes, whether zakat, income tax or even SST, is a shared responsibility to ensure the socio-economic well-being of our society. Zakat plats a crucial role in maintaining Malaysia’s social safety net, providing essential financial assistance to those in need, especially in dire situations, such as the COVID-19 pandemic. It is a reminder that our contributions have and will continue to make an impact on the lives of those in need. Similarly, modern taxation should not be evaded as it plays a crucial role in the sustainability of our economic welfare as a nation. Fulfilling these obligations contributes to the building of a just and prosperous society, ensuring Malaysia’s sustainable development.
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Disclaimer: The information in our blog articles and provided by our brand ambassadors/KOLs is for general insights only and not legally binding. We strive for accuracy but cannot guarantee the information’s completeness or reliability. For legal matters, consult official documents or contact an authorised Ouch! representative.