Relationship and point of view between Islam and taxation

1. MASTER IN ISLAMIC BANKING AND
FINANCE
PRESENTATION BY:
NURUL NADIA BT ABDUL RASHID
NIK NAINUNIS BT ABDUL GHANI
NOR HAFIZAH BT SAMANAL
ISLAM & TAXATION

2. ISLAM &
TAXATION
Introduction
History Of Taxation
Malaysia Tax Legislation
Types Of Taxation
Opinion about Taxation
Important Role of Taxation
Conclusion

3. INTRODUCTION
 Tax is a contribution obtains by Government as
revenue. Tax payer is only be imposed by the law on
an individual or business i.e.: corporate, sole-
proprietorship or partnership when their income
attracts taxation.
 The tax regime in Malaysia was introduced by the
British Colonial Government in Malay Peninsula in
1948, in Sabah and Sarawak is 1957 and in 1961
respectively.

4. HISTORY OF TAXATION
1917-1922
• Due to the unfavourable of the 1910 draft bill, proposal to
introduce income tax were concealed in the more agreeable
language not raising revenue, but to fund the imperil war
expenditure.
1923-1940
• There was no income tax in the Straits Settlements
Post 1945
• The Special Tax Adviser to the Government was appointed in
1946 to draft tax legislation for Malaya. He completed a
comprehensive report in the following year. The Income Tax
Ordinance 1947 took effect from 1 January 1948

5. CONT…
Income Tax
Ordinance 1947
• The provision of the ordinance
were based substantially on the
model colonial Territories
Income Tax Act
1967
• The ITA 1967 actually consolidated
the three laws of income Taxation
then existing in Malaysia

6. MALAYSIAN TAX LEGISLATION
 INCOME TAX ACT 1967
Section
2(7)
Section
6A (3)
Section
18

7. FUNCTION OF INLAND REVENUE
BOARD OF MALAYSIA (IRBM)
 Act 533 INLAND REVENUE BOARD OF MALAYSIA
ACT 1995
FUNCTION
IRBM
To act as agent of
the Government
and to provide
services in
administering
To advise the
Government on
matters relating to
taxation
To participate in or
outside Malaysia in
respect of matters
relating to taxation
May act as a
collection agent for
and on behalf of
any body for the
recovery of loans
due for repayment

8. EFFECTS OF TAXATION
Personal
income Tax
Corporate
income tax

9. THE CHARACTERISTIC OF THE TAXATION
The
characteristic
of the
taxation
Cash
Enforced
contribution
Proportionate
in character
Levied for
public

10. Types of taxation
Types of
Taxation
Islamic
Taxation
Kharaj
Jizyah
Ushr’
Others
Taxation
Personal
Income Tax
Corporate
Income Tax
Sales and
Service Tax

11. • Kharaj is the levy on land produce in the
non-Muslim which was conquered by the
Islamic state as payment to the Islamic
state.
Kharaj
• Jizyah where imposed on non-Muslim by
Islamic state as a protection given to them
and their properties as well.Jizyah
• The Ushr will be charge if he or she
cultivates the land on their own. If their
agricultural destroyed due to natural
calamities or theft, no Ushr is charge.
Ushr’
ISLAMIC TAXATION

12. • Any individual who has income accruing
in or derived from Malaysia or derived
from outside Malaysia.
Personal
Income Tax
• This tax special for resident companies
are subject to tax on income accruing in
or derived from Malaysia.
Corporate
Income Tax
• Current sales tax is a single stage imposed
at the import or manufacturing levels.
• A service tax was introduced in Malaysia
at 1972. It applies to certain prescribed
goods and services in Malaysia.
Sales and
Services Tax
(SST)
OTHER TAXATION

13. OPINION ABOUT TAXATION
First view
• Some Ulama allow
the existence of tax
policy.
• Basic principles of
the Zakat system.
• Not contradicted
with the Shari’ah
principle
Second view
• Some Ulama
argues that the tax
is haram.
• Taxes are not
allowed it will
abuse and become
tool of oppression

14. The Important Role of Taxation
Maximize
allocation
of
resources
The revenue
is due on
various
productive
sectors in
the country
in order to
increase the
country
growth
Raising
government
revenue
The
increases in
tax collection
will cause
the increase
of the
government
revenue
Encouragin
g savings
and
investment
mixed
economy -
promoting
capital
formation
and
investment
for public and
private
sectors

15. Cont…
Accelerating
the economic
growth
Tax policy used
to handle
critical
economic
situation
Control the
mechanism
Taxation is the
only effective
weapon which
private
consumption can
be constrained
and thus
resources
transferred to the
state to ensure
sustainable
development.
Reducing
the
inequities
of income
and wealth
using an
efficient tax
system.

16. Zakat and saving
depend on the nature of
consumption function that the
society follows in its consumption
behavior
Zakat and poverty eradication
to help the needy people especially
to the Muslims nation
Zakat and income distribution
redistribute the resources from the
rich people to the unfortunate
society
Role and
function of
zakat

17. The social area
• to reduce poverty
• those countries
wealth is largely
controlled by a group
of elites who do not
The moral area
• “washes away the greed and covetousness of the rich”.
• important role of zakat in encourages and also impresses a sense of moral responsibility on the rich to look after the poor
• to restrain meaningless of greed, selfishness and covetous
Role and function of zakat

18. Conclusion
• Most of the country implements taxation to increase
their income. From an Islamic perspective, the
collection of taxation is not prohibited, but the rulers
should give the clear explanation.
• The taxation to Muslim should be not compulsory
because Muslim are obliged to pay zakat. But, the
ruler has their own opinion to collect taxes. There
are some requirement for government in
implementation of taxation.

19. Thank you