Does the Indonesian Ulema Council (MUI) Fatwa on Fair Taxation Only Benefit the Rich?

JAKARTA – The Indonesian Ulema Council (MUI) fatwa on fair taxation has sparked a widespread response from the public. While some applauded the fatwa, others expressed disapproval due to its potential impact on regional development.

At its National Conference held from November 20 to 23, 2025, the MUI issued a new fatwa on fair taxation. The fatwa was issued in response to social issues arising from the increase in land and building taxes (PBB), which was deemed unfair and causing public unrest.

Asrorun Niam Sholeh, Head of the MUI Fatwa Division, stated that the tax is only levied on assets that can be used for productivity and/or are secondary and tertiary needs. Therefore, taxation on basic necessities, such as basic necessities, housing, and land, is deemed not to reflect justice and the purpose of taxation.

"So, taxation on basic necessities, such as basic necessities, housing, and the land we live in, does not reflect justice and the purpose of taxation," he said at the 11th MUI National Conference in Jakarta.

According to Sharia principles, Niam added, tax obligations should ideally be imposed on those with sufficient financial means.

"If we compare it to the obligation of zakat, financial capacity, according to Sharia, must be at least equivalent to the nisab (zakatable minimum) for wealth, which is 85 grams of gold. This could be the limit for non-taxable income (PTKP)," Niam explained.

The Indonesian Ulema Council (MUI)'s decision on Fair Taxation has become widely discussed. On the one hand, the spirit of the MUI fatwa on fair taxation is commendable. However, on the other hand, if the Land and Building Tax (PBB) is eliminated, it could have serious fiscal consequences in the regions.

Closing the Loophole for Tax Evasion

In mid-year, several regions in Indonesia experienced a significant increase in Urban and Rural Land and Building Tax (PBB-P2).

Thousands of residents demanded the resignation of Pati Regent Sudewo, who were upset by the 250 percent increase in PBB-P2. The increase sparked a wave of protests, as it occurred amidst an economy that had not yet fully recovered.

Similar increases also occurred in Bone Regency, South Sulawesi; Cirebon City, West Java; Jombang Regency, East Java; and Semarang Regency, Central Java.

According to economic observers, the increase in the Taxable Object Sale Value (NJOP), which led to the increase in PBB, was due to cuts in central government transfers to regions (TKD). Therefore, the government had to find a way to generate new revenue. The government's budget efficiency efforts have resulted in a reduction of Rp 50.29 trillion in regional tax revenues (TKD).

However, Nailul Huda, Director of the Digital Economy Center of Economic and Law Studies (CELIOS), disagrees if the Indonesian Ulema Council (MUI) issues a fatwa regarding the PBB (land tax) repeatedly. PBB, especially PBB-P2 (Public Property Tax), needs to be implemented repeatedly because regional governments need it every year for road maintenance and routine construction.

"There is an increase in value every year that is enjoyed by the community. Therefore, every year, the community pays PBB-P2 to support regional development," Huda said when contacted by VOI.

"Furthermore, this recurring taxation also serves to prevent loopholes for people to evade taxes," he continued.

Furthermore, Huda also highlighted the principle of fair taxation put forward by the Indonesian Ulema Council (MUI). According to him, fair taxation does not mean eliminating taxes, which in practice will benefit everyone, including the wealthy. The principle of fair taxation is that the wealthy pay higher taxes than the poor.

"Even if we impose a tax, there should be a threshold. Those who own buildings with a NJOP (Value-Based Property Value Added Tax) below a certain figure are exempt. Meanwhile, wealthy people with expensive buildings must pay tax. We are even pushing for a progressive rate," he emphasized.

Influence on Fiscal Conditions

If the PBB (land tax) is not repeated, according to Huda, the wealthy will benefit. This is because taxes have budgetary and redistributive functions. The budgetary function is utilized by local governments to finance development, from social to economic development.

"Meanwhile, redistribution focuses on how the rich can pay higher taxes than the poor. If the PBB P2 is only paid once, the rich will be the ones who benefit," Huda added.

Meanwhile, Muhammad Khozin, a member of Commission II of the Indonesian House of Representatives (DPR RI), stated that the MUI fatwa on PBB could impact fiscal conditions if implemented.

He understands that the fatwa is a legal opinion from an Islamic perspective. However, he noted that regional taxes are an important instrument for funding district/city governments.

Khozin reminded that the majority of local governments in Indonesia still have weak fiscal capacity. According to data from the Ministry of Home Affairs, in 2025, there were 15 provinces, 407 regencies, and 70 cities with weak fiscal capacity.

"If it is abolished, it will have a serious impact on regional fiscal capacity. There are 493 local governments with weak fiscal capacity out of a total of 546 local governments across Indonesia," he continued.

On the other hand, he also understands the spirit of the MUI fatwa regarding the PBB-P2 tax and other taxes. However, he emphasized that legal opinions must be based on holistic and comprehensive consideration of various aspects.

"We agree with the spirit of the MUI fatwa on the aspect of justice. However, we must also keep in mind the current objective conditions in our regions. Balance is needed in formulating tax policies, especially in the regions," Khozin concluded.