Zakat versus Taxation as Islamic Fiscal Policy Tool

Challenges and Way Forward

Abstract

Linking Islamic instrument like zakah with social responsibility and economic growth is an area which is often unspoken. As such, this research intends to find out the potential challenges zakah can face while it is used as fiscal policy tool which has link with Islamic socially responsible financing to economic growth to poverty alleviation mentioning few. Though many Muslim based countries using Tax as an alternative tool for government earning, zakah as a tool has broader spectrum from having impact on economic development to the role as an instrument for Islamic socially responsible finance. This research uses qualitative paradigm to analyze the literature. The research is based on a desk-based research. The findings of this research prove that there are challenges to establish zakah as prescribed in the revealed text which can be minimized through different actions. It is projected that properly executed plan to manage zakah could be used as an instrument of fiscal policy as well as an Islamic socially responsible financing instrument.