Zakat in language is an infinitive of the verb zakah. Zakat means to grow and to increase. When it is said about a person, it means to improve, to become better. Consequently zakat is blessing, growth, cleanliness, and betterment [1] . In Lisan al Arab it is said, "The root of the word zakat in Arabic means cleanliness, growth, blessing, and praise. In Shari'ah the word zakat refers to the determined share of wealth prescribed by God to be distributed among deserving categories. It is also used to mean the action of payment of this share [2] . Ibn Taimiyah said that the inner soul of the zakat payer becomes better, and his wealth becomes cleansed [3] . Growth and cleanliness are not restricted to the zakated assets themselves, but reach out to the person who pays zakat, in accordance to the verse "out of their wealth take zakat that so thou mightest purify and sanctify them".
Zakat is the most important element of financial structure in Islamic perspective. The importance of zakat as integral part of the obligation of Muslim can be seen that there are about twenty places in the Qur'an mentioning the instruction of zakat consecutively with the order to perform prayers (Siddiqi, 1968, p.8). Some are
[MARYAM 19:19] He said, "I am the messenger of your Lord, to grant you a (GHULAMAN ZAKIYYA) pure son."
[AL-KAHF 18:74] So they went. When they met a (NAFSUN ZAKIYYA- pure, well built) young boy, he killed him. He said, "Why did you kill such an innocent person, who did not kill another person? You have committed something horrendous."
(AL-KAHF 18:19) When we resurrected them, they asked each other, "How long have you been here?" "We have been here one day or part of the day,"they answered. "Your Lord knows best how long we stayed here, so let us send one of us with this money to the city. Let him fetch the (AZKA-pure, most nutritious) food, and buy some for us. Let him keep a low profile, and attract no attention.
[ASH-SHAMS 91:7] By the Soul, and the proportion and order given to it;
[ASH-SHAMS 91:8] And its enlightenment as to its wrong and its right;-
[ASH-SHAMS 91:9] Truly he succeeds that (ZAKKAHA) purifies it,
[ASH-SHAMS 91:10] And he fails that corrupts it!
[AL-BAQARAH 2:83] We made a covenant with the Children of Israel: "You shall not worship except The GOD. You shall honor your parents and regard the relatives, the orphans, and the poor. You shall treat the people amicably. You shall observe (Salat- reaching out through reading at prescribed times) and (Zakat- purifying yourself using your enlightenment from salaat)." But you turned away, except a few of you, and you became averse. (you threw the Scripture behind your backs and increased in wrong doing instead of purification)
(AL-BAQARAH 2:219] They ask you about intoxicants and gambling: say, "In them there is a gross sin, and some benefits for the people. But their sinfulness far outweighs their benefit." They also ask you what to give to (sadaqa) charity : say, "The excess." The GOD thus clarifies the revelations for you, that you may reflect,
[AT-TAUBAH 9:71] The believing men and women are allies of one another. They advocate righteousness and forbid evil, they observe (Salat-Reaching out by reading Qur'an at prescribed times) and (Zakat- purification from following the commands and enlightenment in Qur'an such as spending in charity), and they obey The GOD and His messenger (Allah and His Message). These will be showered by The GOD's mercy. The GOD is Almighty, Most Wise.
[AL-BAYYINAH 98:5] All that was asked of them was to worship GOD, devoting the religion absolutely to Him alone, observe Salaat, and Zakaat. Such is the perfect religion.
Zakat has been defined technically by the Hanafi as 'the giving, as an act of piety, of a legally stated portion of one's property to a poor Muslim who is not of the Hashim family or their client in such a way as to preclude for the giver any short of benefit'. There is another term having similar meaning with the term of zakat, 'sadaqah'. It is a more generic term and includes both voluntary and optional 'alms. Thus every zakat can be considered as sadaqah, however only obligatory sadaqah will be included as zakat. Talking about zakat unavoidably include taxation due to close relationship between these two terms. If zakat is attached to individual religious obligatory, taxation is attached obliged individual citizenship relation with government. The secular taxes are purely civil obligations and free of religious implications (Siddiqi, 1968, p. 172). While the tax rates are designed and modified by the government (mostly in progressive rates), the rate of zakat are based on Islamic law and uses the fixed rates (QS:70: 24-25) In addition, there are some important similarities and dissimilarities between zakat and tax as indicated by Hannan (1998). The similarities include;
a) Zakat is liable to be collected by force like tax if the payer does not pay it willingly. This position is applicable where the state compulsorily collects zakat. The Qur'an and Sunnah state clearly that it is the obligation of an Islamic States which follow Islam to collect zakat;
b) Zakat collected in an Islamic state has to be kept in the state treasury, in a separate account, like tax. If zakat is collected by non-government organizations, this fund should be kept safely as in the case of any public fund;
c) Zakat, like tax, is paid though there is no direct and equivalent economic benefit is obtained by the payer. Whereas the dissimilarities between zakah and tax include;
i) Zakat is an ibadah (act of worship) which Allah has made compulsory on human being to express gratitude to Him and to obtain Taqwa. Tax is social obligation without having special sense gratitude to Allah. While zakat is essentially a matter between Allah and His servants, but tax has been primarily a matter between citizens and the states authorities;
ii) Zakat is based on nisab, any wealth below a limit is exempted from zakat. This is not true in the case of many taxes in modern times;
iii) Zakat is a permanent and regular system. None can change it in any way. On the contrary, most of the tax undergoes change from time to time.
Another religion has the same concept as zakat namely 'tithe' which is obligated to Christianist. It differs from the tithe in that it is destined wholly to eight classes of beneficiaries and no part of it may go to the state, the function of which is only to supervise, custody and distribution. The tithe on the other hand went to the Church which discharged it as it deemed fit (Zayas, 2003, p. xvii). Although there is different meaning of the term zakat and tax, some author said that zakat is a type of tax (for example Siddiqi, 1968). He said that zakat is the main tax in Islamic state. Besides zakat, other types of revenue in Islamic State are;
Pay revenues such as Jizya (collected and spent on the non Muslim citizens);
Kharaj; custom duty; waqf;
2) The booty revenue such as tax of mines and tax on treasure trove;
3) Property lost and found and the estates left by Muslims who have no heirs or
leave only a husband or a wife.
The institutions of zakat have been existed since time immemorial. The Qur'an presents many verses that are addressed to various Prophets, from Adam to Muhammad, telling their people to give zakat, for example Adam (QS:2:37,47); Abraham (QS:21:69, 71-73); Ismael (QS:19:54-55); Moses (QS:7:155-156) and Muhammad (QS:2:277).
1.2 Zakat in Malaysia
Zakat in the Context of the Malaysian Economy Zakat Institution has not played a significant role so far, the main reason is the small amount of zakat collected in the country. It is very small (about RM 408 Million in 2003) compared to the revenue of the government (which is about RM 89.2 billion from tax and other revenues) Therefore, development of the Muslim community in this country does not and cannot depend on zakat money. Zakat is such a small portion. The economic, educational and social needs of the community are financed almost wholly from government revenue.
If a national zakat organization is set up and the collection in Malaysia is about RM 700 million a year. The projected collections include zakat on business if they are given rebate from corporate tax. Even though it is still a small amount compared to government revenue and the general economy, the zakat institution may then be able to play some significance role in meeting some of the needs of the community, provided effective distribution programs are carried out in all the states to complement government programs. The challenge is to be able to make an impact on the community using zakat money of about RM 430 million a year collected by the various Islamic councils in the country.
Overall the Malaysian economy is many times larger, namely about 230 billion ringgit for a population of about 25 million people of whom about 61 are Muslims. Zakat Organization in Malaysia , though Islam is the official religion, The Federal Government does not have the fullest authority in religious affairs. Zakat is the responsibility of the Islamic Council of each state in the country. There are 14 Islamic Councils, one for each of the 13 states and one for the Federal Territory Wilayah Persekutuan of Kuala Lumpur. Each state has its own religious Administration Enactment while the Federal Territory has its own Act to manage zakat. The Islamic Councils have a unique status in that they are not a part of the Federal or State Government. However, they have been established either through Federal or State legislation. They also depend on the Islamic Religious Department which is a government department existing in each state to provide the administrative services and to implement the decisions of the Council.
The Council is mainly a policy-making and supervisory body. Each Council is report to the Sultan or Ruler of each State. The National Council for Islamic Affairs acts as a coordinator between the various state Islamic Councils especially when it concerns Islamic matters that affect the whole country.
Since its inception the Pusat Pungutan Zakat (PPZ) has experienced many changes and improvements in its administration by passing bureaucratic procedures and a customer oriented approach as well as a pro-active approach in tackling customer complaints. PPZ was officially open by the Ex-Prime Minister of Malaysia, Tun Dr. Mahathir Muhamed On 8th March 1991 by being the first zakat office to operate in a new corporate style. Zakat Organization in the Federal Territory of Kuala Lumpur The Islamic Council of the Federal Territory of Kuala Lumpur has set up a Zakat Collection Centre (PPZ) having a corporate style management combined with computerized collection system, proactive marketing and customer-oriented approaches.
In early of 1991, the Federal Territory Islamic Religious Council had established a subsidiary company known as Hartasuci Sdn. Bhd., also known as Zakat Collection Centre. While the responsibility of the Zakat Collection Centre is to collect zakat on mal & self for the Federal Territory Religious Council, while the distribution of zakat is still being done by the Federal Territory Baitulmal. Therefore in 1990, a proposal made by Y. Bhg. Dato' Haji Abdul Rahim bin Abu Bakar to Y.B. Tan Sri Dato' Dr Mohd Yusof Noor was well received to try out a new system and structure of establishing a new Zakat Collection Centre. A study done by a consultant (PricewaterhouseCoopers) had summarized the following findings to be implemented by the Federal Territory Religious Council. - The first was to adopt a corporate method and structure as a way to collect zakat. - The Second was to set up an office specifically for zakat i.e. Zakat Collection Centre that is separated from other activities of the Federal Territory Islamic Religious Department. - And the third to fully utilize computer technology in all zakat collection transactions. Since its inception the Zakat Collection Centre has experienced many changes and improvements in its administration by passing bureaucratic procedures and a customer oriented approach as well as a pro-active approach in tackling customer complaints. Zakat Collection Centre was officially open by the Ex-Prime Minister of Malaysia, Tun Dr. Mahathir Mohamed on 8th March 1991 by being the first zakat office to operate in a new corporate style. [4] Zakat is the compulsory giving of a set proportion of one\'s wealth to charity. It is regarded as a type of worship and of self-purification. Zakat does not refer to charitable gifts given out of kindness or generosity, but to the systematic giving of 2.5% of one\'s wealth each year to benefit the poor. The benefits of Zakat, apart from helping the poor, are as follows:
Obeying God
Helping a person acknowledge that everything comes from God on loan and that we do not really own anything ourselves
And since we cannot take anything with us when we die we need not cling to it
Acknowledging that whether we are rich or poor is God\'s choice, so we should help those he has chosen to make poor
Learning self-discipline
Freeing oneself from the love of possessions and greed
Freeing oneself from the love of money
Freeing oneself from love of oneself
Behaving honestly the 2.5% rate only applies to cash, gold and silver, and commercial items. There are other rates for farm and mining produce, and for animals.
1.2.1 Zakat in Pulau Pinang
On October 23, 1993, The Honorable Financial Officer of the State, the Honorable Dr. Haji Mohd Shahar bin Sidek has presented a paper relating to the establishment of a wholly owned (100%) MAINPP for the managing the collections of zakat in Penang. By June 1, 1994 - Companies Zakat Al-Sahabah Governance Sdn. Bhd.. (ASUZ) has been registered by company officials MAINPP collect on behalf of MAINPP - 302434 A number of companies with capital investments amounting to RM1, 019,658.00 and incorporated under the Companies Act 1965 as a private limited company wholly owned MAINPP.
Only on September 1, 1994, ASUZ began full operations in the name of Zakat Governance Centre Penang PUZ or simply as a name for ASUZ office seeks to maintain the 'public interest' to charity institutions.
Jurisdiction
In the early stages of establishment, jurisdiction PUZ merely collecting zakat on Penang Island and Seberang Perai. MAINPP still play a role in tithe collecting and distributing zakat funds in the state of Penang. However, the success PUZ improve zakat collection of 0:19 million RM in 1994 to RM 9:36 million in 1998, was convinced that PUZ MAINPP great potential for the operation of zakat collection and distribution as well. In March 1999, MAINPP have full confidence to PUZ to fully control the operations of both the collection and distribution of zakat to Penang and also the collection and distribution of tithe.
Charity collection at the beginning of the constitution
PUZ originally commenced operations on December 27, 1994, based in Garden Channel, Butterworth. In the early stages of establishment, there are three branches of the service counter at the charity has opened the Straits Gardens, Butterworth, Penang Islamic Religious Department (JAIPP), and the Complex Bukit Mertajam. Now, PUZ has added four (4) the charity branch of the service counter at the Garden Jawi Jaya, Bayan Baru Masjid, Taman Sri Genting Balik Pulau, Abdullah Fahim Complex, Kepala Batas and Buckingham Street (replacing JAIPP). On January 3, 2005, PUZ greater strides when it is able to have its own building at Bandar Perda, Bukit Mertajam thus making it the headquarters of the new PUZ.
Among its objectives is the establishment PUZ : -
Improving the collection of zakat Penang
Zakat system introduced a more systematic through computerized operations.
As an element of mind and realize that the Muslim charity to play a major role in strengthening the economy of the Muslims.
Provide and distribute the money to pay zakat to the more efficient and fair for the paying of zakat and Muslims are confident and satisfied.
Introduce corporate culture in the operation of collection and distribution of zakat funds.
1.3 Problem Statement
1. The literature review reveals that Zakat management is not delivering on its prospects 2. How zakat can effect to government tax
3. Limited source of zakat
4. Zakat is a tool that helps redistribution of wealth and that contributes to helping the poor and needy.
5. To what extent are the theories of Zakat practiced efficiently and effectively today?
1.4 The Objective Of The Study
1. To analyze the performance of zakat in Malaysia
2. Attempting to reveal the nature zakat as an Islamic obligation, comparing it with
others modern taxes, and showing the similarities and differences between them.
3. To analyze the effecting zakat to the Malaysia Economic
4. To analyze the operation of "Pusat Urusan Zakat"
5. Answering questions on zakah arising from modern economic practices, questions
can't continue neglecting anymore.
6. Presenting the objectives and goals of zakah and its effects on Muslim society in
solving problems like poverty, destitution, and begging and in facing socio-economic
miseries and showing the precedence of zakah with regard to social solidarity and
social insurance.
1.5 Research Question
1. How is the performance of zakat collection in Malaysia?
2. Can zakat will effect the Malaysia government tax?
3. How the operation of the Pusat Urusan Zakat in Malaysia?
4. How Zakat can be the system of social welfare?
5. How zakat can help the Malaysia economic?
1.6 Research Hypothesis
Few hypothesis had been developed in order to have more understanding toward this research, which are;
Hypothesis 1
H0 = The performance of zakat collection is not good in Malaysia
H1 = The performance of zakat collection is good in Malaysia.
Hypothesis 2
H0 = Zakat is not give effecting to government tax
H1 = zakat is giving effecting to government tax
Hypothesis 3
H0 = Operation of Pusat Urusan Zakat is good in Malaysia
H1 = Operation of Pusat Urusan Zakat is not good in Malaysia
Hypothesis 4
H0 = zakat can be the systems of social welfare
H1 = zakat can't be the systems of social welfare
Hypothesis 5
H0 = zakat can help Malaysian economic
H1 = zakat can't help Malaysia economic
1.7 Significance Of The Study
1. The essence of each of zakat and taxes.
2. Theoretical foundations for levying of zakat and of taxes.
3. Assets subject to zakat and to taxes.
4. Principles of levying taxes and zakat.
5. Proportionality and progressiveness of taxes and zakat.
6. Legal and moral support for zakat and for taxes.
7. Is it permissible to levy taxes beside zakat?
8. Can taxes substitute for zakat?
1.8 Operational Defination
Effectiveness is the extent to which an activity fulfils its intended purpose or function.
1.8.1 Analytical review
Fraser (1994, p. 104) defined it thus:
Effectiveness. This is a measure of the match between stated goals and their achievement. It is always possible to achieve 'easy', low-standard goals. In other words, quality in higher education cannot only be a question of achievements 'outputs' but must also involve judgments about the goals (part of 'inputs')
Erlendsson (2002) defines effectiveness as:
the extent to which objectives are met ('doing the right things').
The UNESCO definition is
Effectiveness (educational): An output of specific review/analyses (e.g., the WASC Educational Effectiveness Review or its Reports on Institutional Effectiveness) that measure (the quality of) the achievement of a specific educational goal or the degree to which a higher education institution can be expected to achieve specific requirements. It is different from efficiency, which is measured by the volume of output or input used. As a primary measure of success of a programmed or of a higher education institution, clear indicators, meaningful information, and evidence best reflecting institutional effectiveness with respect to student learning and academic achievement have to be gathered through various procedures (inspection, observation, site visits, etc.). Engaging in the measurement of educational effectiveness creates a value-added process through quality assurance and accreditation review and contributes to building, within the institution, a culture of evidence. (Vlãsceanu et al., 2004, p. 37)
Wojtczak (2002) defines effectiveness in the context of medial education:
Effectiveness: A measure of the extent to which a specific intervention, procedure, regimen, or service, when deployed in the field in routine circumstances, does what it is intended to do for a specified population. In the health field, it is a measure of output from those health services that contribute towards reducing the dimension of a problem or improving an unsatisfactory situation.
2. LITERATURE REVIEW
Shah Muhammad Habibur Rahman (1979) objectifies Zakat as tool to deter concentration of wealth in a few hands, which lead to social stratification which Islam strongly condemns and to eliminate poverty from the Islamic society. [5]
Dr. Asad Sayeed and Farhan Sami Khan (2000) describe Zakat, Ushr and Baitul-ul-Mal as the major social safety nets schemes in Pakistan. The purpose of these schemes is providing financial assistance and rehabilitation of the poor, needy and destitute. [6]
Monowar Hossain (2007) is surprised that Zakat, an expressly designed poverty eradication tool, clearly prescribed in the holy Qur'an and Sunnah, has been completely ignored in all poverty alleviation plans and programs in Bangladesh, where more than 85 percent of the population are Allah-fearing Muslims. Also, there is confusion and ignorance about true practices of Zakah in the mind of these people, which resulted in lasting benefits not accruing to the traditional Zakat receivers. [7]
Rahmatullah (2007) illustrates that Islam enjoins on believers a duty of individualistic and collective nature. Moreover duties of the individualistic nature also carry social dimensions. This is due to the fact that Islam considers individual as an integral part of the total society. Therefore he has much rights and duties towards it as it has towards him. Zakah as prescribed by holy Qur'an indicates nothing but social security/insurance to the indigents of the society where Zakat is practiced. [8]
S.M. Ali Akkas (2007) points out the need for introducing a continuous basic minimum initial asset/capital transfer mechanism like Zakat. Because government safety net programs are often seasonal, poorly covered and aptly regarded as least organized thereby having very marginal impact on poverty. Market mechanism, on the other hand, has nothing to do with poverty except the poor receive something by its trickle down effects emanated from higher growth. [9]
Haitam A. Al-Zoubi, Kabir Hassan, Bashir Al-Zu'bi and Aktham Maghyereh (2006) show the difference between Zakat system of social security and the traditional system. Zakat is not a compulsory contributory savings plan for the future. It is being paid to the needy people and other groups in order to get reward in the hereafter. Therefore, it is much wider in scope than a traditional social security system. Zakat is indeed a relief to its recipients in the short-run, and at the same time it is a long-run mechanism to lessen the impact of poverty and other economic and social problems. [10]
M. Kabir Hassan (2008) states that Zakat is a religious obligation and instruments of poverty alleviation .Consensus emerging that many conventional development programs have failed to reduce poverty. Therefore, need to seek alternative programs and strategies. In this case, Zakat is the best strategy. Rationale of using Zakat is that it is the unique faith-based institution and Still Zakat is unutilized for poverty alleviation. [11]
3. RESEARCH METHODOLOGY
This study attempts to answer 5 major issues which related to the following;
1. How is the performance of zakat collection in Malaysia?
2. Can zakat effecting the Malaysia government tax?
3. How the operation of the Pusat Urusan zakat in Malaysia?
4. How Zakat can be the system of social welfare?
5. How zakat can help the Malaysia economic?
In order to answer all the issues, this study has identified a few methodologies that should be employed such as from the primary and secondary sources, which were gathered through questionnaires, personal interview and observation. The observation was conducted in order to gather a depth study and understanding the effective of zakat to Malaysia economic.
3.1 Primary Data
The primary data were originated and collected by researcher on order to investigate at hand. The data is collected through questionnaires, personal interview and observation.
1. Customer Survey
2. Personal Interview
3. Observation
3.2 Secondary Data
The secondary data is a data by which the specification, collection and recording are done by someone else other than user. The secondary data are the statistics that were not gathered for the immediate study at hand for some other purposes. Sources of the secondary data are as follows:
a) Internal source
The internal sources are the data collected within the organization for which the research is being carried out. It includes the followings:
Pusat Zakat Wilayah Persekutuan Annual Report
Pusat Urusan Zakat Pulau Pinang Annual report
Pusat Urusan Zakat Selangor annual report
Pusat Urusan Zakat Pulau Pinang hand out and phamplets
Public Relation Unit of Pusat Urusan Zakat Pulau Pinang.
b) External Sources are data obtained from outside of which from the following:
Text books
Journal
Magazines
Thesis and research documents
Seminar paperwork
3.2.1 Sampling Technique
The non probability techniques were used in this research. There are the sample sizes and generalization to the population tends not to be the major consideration. It is on the researcher's judgment on the selection of the population element to be part of the sample. This convenience sampling which is non-probability sampling technique were selected as the sample were easily accessible, reduce in the time consume and cost effective.
3.2.2 Sample Size
Out of the population in Mukim Bukit Indra Muda,Penang only 100 respondents were selected. 100 sets of questionnaires were distributed and it was assumed that these respondents represented the total sample size determination.
3.2.3 Analysis of Data
A cross tabulation and statistical Package for Social science (SPSS) were used to analyze data collected.
3.2.4 Procedure of Analyzing Data
A cross tabulation is a statistical procedure commonly used to describe the responses to two or more variable. A table cross classifying the level of one variable with the levels of some other variable provides the variables (2 variables at one time) frequency distribution. The tables are also often referred to as contingency table. The Chi-Square test or Pearson's Correlation test were used as a procedure for comparing hypothesis population distribution across categories against and observed distribution. A test performed at the 5% significant level was thus performed the 1-0.05 = 0.95 confient level. In comparing the observed distribution with a hypothesis, the following Chi-Square (X) being used:
X2 = (Oi - Ei)
Ei
X = Numbers of categories of the variable
Oi = Observed frequencies
Ei = Expected frequencies
In Chi-square test a hypothesized population was compared to the distribution generated by the sample. The degrees of freedom were derived based on the following:
Degree of freedom = (row - 1) (column - 1)
The observe value which was compared to the critical value from the Chi-Square distribution table for the given significant level and the number of degree of freedom. If the observe value is greater than the critical value. The null hypothesis (Ho) would be rejected and vice versa. This may be clear in the one-tailed test. In hypothesis testing, cross tabulation was used to identify a relationship between variables. Therefore it can be observed, of what appeared to be a relationship between two nominal variables. Che-Square test is designed to answer weather this observed relationship is the results of sampling error and might tell us also that two variable are not independents. However it does not tell anything about the nature of the relationship.
