Beyond complexity: do alms tax (zakat) law intricacies justify non-compliance behaviour?

Saeed Awadh Bin-Nashwan

Journal of Financial Regulation and Compliance, 2025, vol. 33, issue 3, 307-325

Abstract: Purpose - While the foundations of alms tax (zakat) regulations remain firmly rooted in solid Islamic law (Shariah), the landscape of zakat laws has recently witnessed the emergence of nuanced issues and complexities that warrant careful consideration and scholarly investigation. Such intricacies might lead to a lack of compliance with the regulatory and legal framework many Muslim countries have implemented. Thus, this paper aims to empirically delve into the role of zakat law intricacies in compliance behaviour and how it can strengthen the impact of crucial socio-economic motivations, including perceived zakat governance and institutional credibility. Design/methodology/approach - Drawn from a validated socio-economic model, this study used a quantitative approach, using a self-administered survey distributed among SME entrepreneurs. SmartPLS was used to yield meaningful results. Findings - Results indicate that the more intricate the zakat law and regulations, the lower zakat compliance tends to be. However, socio-economic motivations (zakat governance and institutional credibility) positively drive the compliance behaviour of zakat payers. Interestingly, socio-economic factors lose their positive effect on zakat compliance in the face of zakat law intricacies. Practical implications - As the contemporary world grapples with dynamic social and economic challenges and evolving legal frameworks, the landscape of zakat laws and regulations finds itself at a crossroads. While the essence of zakat remains unchanged, modern contexts have introduced new dimensions that require the re-valuation of existing regulatory frameworks. From the intricacies of cross-border zakat to digital assets and emerging financial instruments, zakat governance is undergoing a profound transformation. Therefore, the outcomes that emerged from this study provide deeper insights for policymakers and practitioners in the Islamic world into how some potential interventions can enhance the zakat legal framework. Simplification initiatives, educational campaigns and an effective zakat governance structure aligned strictly with Islamic law can offer a nuanced understanding of zakat payers’ compliance behaviour. Originality/value - The novelty of this research lies in its focused analysis of zakat law intricacies – a topic that has been overlooked in the literature despite its critical importance.

Keywords: Alms tax; Zakat law; Compliance behaviour; Law intricacies; Zakat governance; Institutional credibility (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrcpp:jfrc-08-2024-0165

DOI: 10.1108/JFRC-08-2024-0165

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