Zakat Tax Credit Proposal: A Solution to Encourage Zakat Compliance and Strengthening Philanthropy
JAKARTA - The Indonesian Philanthropy Association (PFI) expressed full support for the proposal of the National Sharia Council of the Indonesian Ulema Council (DSN MUI) regarding the reform of religious fiscal policy. PFI encourages the government to set zakat as a direct tax reduction (tax credit), not just a tax deduction as is currently the case.
This strategic step is considered capable of strengthening the national Islamic philanthropy ecosystem. It is believed that greater fiscal incentives for taxpayers will increase compliance, increase the collection of religious social funds, and encourage more organized distribution of zakat.
In order to uphold the principle of justice, PFI also proposes that this tax credit policy be applied inclusively to other mandatory religious donations in Indonesia.
Difference between Tax Deduction vs Tax Credit Zakat
Currently, tax regulations in Indonesia only position zakat paid through official institutions as a reduction of taxable income. This rule refers to the Income Tax Law Article 9 paragraph (1) letter g jo PMK 114 of 2025.
This tax deduction scheme is considered less optimal in attracting taxpayers to channel their zakat through formal channels. Instead, the proposed tax credit scheme from DSN-MUI will make the amount of zakat paid directly deduct the tax bill owed 1-on-1. This provides a much more tangible financial benefit for zakat payers (muzakki).
Shifting the Informal Zakat Culture to Official Institutions
The Chairman of the PFI Expert Council, Prof. Amelia Fauzia, M.A., Ph.D., emphasized that the tax credit policy has the potential to attract donations from the middle and upper classes. This group has a large financial capacity, but so far they still often channel their zakat informally.
Based on the National ZISWAF Survey (Zakat, Infak, Sedekah, and Wakaf) released by STF UIN Jakarta, Commission on Asian Philanthropy, and Indonesian Political Indicators, the total potential of Indonesian Muslim philanthropy is very fantastic, reaching IDR 343.08 trillion.
"Unfortunately, 73 percent of the total funds are still channeled directly informally to beneficiaries or unofficial institutions. Only about 27 percent or less than Rp. 100 trillion is managed by professional zakat institutions," said Amelia.
Amelia is optimistic that this progressive fiscal policy can transform the pattern of community philanthropy.
"The tax credit policy is able to shift the pattern of direct distribution towards institutional distribution, increase compliance with zakat, and strengthen the governance of national philanthropy," he added.
Learning from the Success of Malaysia and Other Countries
The application of tax credits for religious social contributions is not new in the international world. Lecturer of the Fiscal Administration Studies Program at the University of Indonesia, Dr. Ning Rahayu, M.Si, explained that many countries have adopted similar schemes as instruments for poverty alleviation.
Some countries that have successfully implemented this tax incentive policy include:
Malaysia: Implementing this policy since 1967 through the Income Tax Act, has been a great success in increasing compliance and the amount of national zakat collection. South Korea: Since the 2014 tax reform, changing the system from tax deduction to tax credit for charitable donations to help low-income donors get a fair tax benefit. United Kingdom, France, & Spain: Using a similar tax credit scheme on humanitarian donations to strengthen the philanthropy sector and financing social programs.In addition, countries such as Pakistan, Sudan, and Bangladesh have also successfully implemented special tax credit schemes for zakat that are channeled through official state institutions.
Does Zakat Tax Credit Reduce State Revenue?
One of the biggest concerns of the government in implementing tax credits is the potential decline in state tax revenue. However, Ning Rahayu dismissed this concern based on global empirical data.
"Various research shows that fiscal incentives such as tax credits have not been proven to significantly reduce tax revenue. In many cases, this policy actually creates a multiplier effect that strengthens the economy and consumption of the community," said Ning.
Furthermore, this member of the PFI Expert Council explained the comparison of the potential vs. realization of zakat in Indonesia today:
National Zakat Metrics
Amount (Rp)
Total Potential Zakat (BAZNAS Data)
Rp327 Trillion
Current Collection Realization
Rp40 Trillion
Unutilized Potential Gap (Gap)
Rp287 Trillion
According to Ning, this gap of IDR 287 trillion can be worked on optimally through tax credit incentives supported by the transparency of the digital system.
"Malaysia's experience proves the real benefits of this policy: the government's social spending burden is reduced because it is helped by zakat funds, welfare is improved, poverty rates are reduced, and the consumption of the lower-income group is also boosted," he concluded.
Invitation to Collaborate to Build a Philanthropic Ecosystem
As an association committed to strengthening the national philanthropy ecosystem, PFI invites all elements - from the government, DPR, philanthropic institutions, the private sector, to the wider community - to oversee the realization of this policy.
On the other hand, PFI also urges all Lembaga Amil Zakat (LAZ) to continue to improve their governance capacity. The readiness of the institution in managing the surge in funds by adhering to the principles of transparency, accountability, and absolute professionalism is necessary to realize social justice and sustainable development in Indonesia.