Factors Determining Zakat Rebate Preferences in Malaysia: Zakat as Tax Deduction

Abstract

This research aims to analyze factors that could affect preferences for zakat rebates (i.e., zakat as a tax deduction) in Malaysia. In 1967, Malaysia’s Income Tax Act legalized zakat and made it tax-deductible. An applied quantitative method (SmartPLS) was used to construct a formative model on Muslims in Malaysia. Participants in the research were economics faculty members from universities in Malaysia. The results show that satisfaction affects preferences for zakat rebates and may prove that Muslims pay zakat because they are satisfied with their zakat institution. Other findings show that Malaysian Muslims only focus on income zakat and not on maal (wealth) zakat, which may be caused by the monthly zakat rebate system. This may be the first research paper that discusses zakat rebate preferences in Malaysia using a theory based on service quality and behavioral consequences.