Indonesia's Baznas proposes piloting zakat-as-tax-deduction in Aceh

The National Zakat Agency (Baznas) of Indonesia has proposed piloting a policy that would allow zakat (obligatory charity) payments to be directly used as a tax credit. The agency suggests this trial should commence in Aceh province before any nationwide implementation.

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A trial is needed to answer various concerns that the tax credit scheme could potentially reduce state tax revenue.

Rizaludin Kurniawan, Baznas's Head of Fundraising, explained the necessity of a pilot program. "A trial is needed to answer various concerns that the tax credit scheme could potentially reduce state tax revenue," he stated during a Philanthropy Journalism FGD event in Jakarta. He added, "So, it's actually interesting, if the state wants to see, whether zakat payments are high, and if paying zakat can reduce taxes, does this affect the number of zakat payers and taxpayers? There is room in Indonesia for this to be tested. At least Aceh can be used to see."

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So, it's actually interesting, if the state wants to see, whether zakat payments are high, and if paying zakat can reduce taxes, does this affect the number of zakat payers and taxpayers? There is room in Indonesia for this to be tested. At least Aceh can be used to see.

Aceh was chosen as a potential pilot region due to its strong adherence to Islamic law and a relatively established zakat management system compared to other provinces. Kurniawan noted concerns that if zakat payments reduce taxable income, it could lower tax revenue, or vice versa. "The concern is, if zakat reduces tax income, the tax credit, the zakat payers are high, but the taxes decrease, there is that concern. Or vice versa. Well, this can be validated in Aceh," he said.

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The concern is, if zakat reduces tax income, the tax credit, the zakat payers are high, but the taxes decrease, there is that concern. Or vice versa. Well, this can be validated in Aceh.

Baznas referenced Malaysia's experience, where research suggests that implementing zakat as a tax deduction led to an increase in both zakat collections and tax revenue. However, Kurniawan stressed that Indonesia's unique characteristics necessitate empirical testing. "If in Malaysia, research shows that zakat increased and taxes increased. But in Indonesia, anything must be tested. Perhaps this is it, we can test it in Aceh," he concluded.

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If in Malaysia, research shows that zakat increased and taxes increased. But in Indonesia, anything must be tested. Perhaps this is it, we can test it in Aceh.