Calls to recognize zakat as a direct credit against income tax liability are gaining momentum as the country continues to evaluate its statutory landscape and refine its national economic policies. The proposal has drawn support from academic discussions, philanthropy groups, constitutional law experts, and prominent religious leaders.
According to the National Board of Zakat (Badan Amil Zakat Nasional/BAZNAS), zakat is a mandatory charitable contribution for eligible Muslims that must be distributed to qualified beneficiaries. A tax credit, meanwhile, directly offsets a taxpayer’s income tax liability. Article 28 of Law of the Republic of Indonesia Number 36 of 2008 concerning the Fourth Amendment to Law of the Republic of Indonesia Number 7 of 1983 concerning Income Tax allows taxpayers to reduce their tax payable through tax credits that have been paid or withheld in advance.
The National Sharia Board of the Indonesian Ulama Council (Dewan Syariah Nasional Majelis Ulama Indonesia/DSN MUI) first championed the proposal. DSN MUI Head of the Executive Board Cholil Nafis stated that the council is advocating for zakat to be recognized as a tax credit, enabling taxpayers to fulfill both their religious and tax obligations simultaneously.
“When we talk about economic growth through zakat, it does not mean wealth disappears. The larger a company becomes, the greater its zakat contribution. As more zakat circulates throughout society, purchasing power increases, ultimately driving economic growth,” Cholil said on Tuesday, July 7, 2026.
A focus group discussion among scholars organized by the Research Agency of the People's Consultative Assembly (Majelis Permusyawaratan Rakyat/MPR) in Padang, West Sumatra, later expanded the discussion. Tifatul Sembiring, Head of Group IV of the MPR Research Agency, emphasized the importance of reviewing the national economic direction in line with Article 33 of the 1945 Constitution. He argues that economic policies should be grounded in long-term philosophical principles rather than short-term responses, while suggesting that the discussion could eventually lead to proposals to amend the 1945 Constitution.
“Government policies should not merely respond to immediate challenges. Every policy should be guided by a clear philosophy, vision, and strategy to avoid creating new problems,” Tifatul further explains.
During the same forum, constitutional law expert Dr Charles Simabura of Andalas University pointed out the state’s growing role in managing religious and social funds, including approximately IDR 180 trillion in hajj funds and hundreds of trillions of rupiah in potential zakat collections. According to Charles, such significant public participation requires a scope limitation between the government’s regulatory and operational functions to maintain accountability.
Improving Compliance
The Indonesian Philanthropy Association (Perhimpunan Filantropi Indonesia/PFI) has also expressed strong support for DSN MUI’s proposal, citing the enormous untapped potential of Islamic philanthropic funds. PFI Advisory Board Chair Prof Amelia Fauzia noted that of the estimated IDR 343.08 trillion in Islamic philanthropy potential, approximately 73% is still distributed through informal channels.
“A tax credit policy could encourage a shift from direct giving to institutionalized distribution, improve zakat compliance, and fortify the governance of the national philanthropic sector. We believe this approach would promote greater compliance through progressive fiscal policy while encouraging more organized and accountable charitable giving,” Amelia said in a statement on Tuesday, July 14, 2026.
Boosting the State Revenue
The proposal has also received support from the University of Indonesia’s fiscal policy expert, Ning Rahayu. She argued that tax credit schemes implemented across countries have generated positive multiplier effects without significantly reducing state revenue. She noted that jurisdictions such as Malaysia, South Korea, France, the United Kingdom, Spain, and several others have long provided tax incentives for philanthropic activities through various systems.
“Fiscal incentives in the form of tax credits do not necessarily reduce state revenue. Instead, they create multiplier effects that strengthen tax collections while encouraging greater public participation in social initiatives,” she said.
Updates to the Zakat Law
Political backing for integrating zakat into the tax system has also emerged from Deputy Speaker of the MPR, Hidayat Nur Wahid, also known as HNW. He has proposed incorporating the tax credit mechanism into the amendment of Law of the Republic of Indonesia Number 23 of 2011 concerning Zakat Management, which has been included in the 2025-2029 National Legislation Program (Program Legislasi Nasional/Prolegnas). According to HNW, the proposal would provide constitutional recognition for citizens who fulfill both their religious and tax obligations while following up on Constitutional Court Decree Number 97/PUU-XXII/2024. He emphasized, however, that enhancing zakat governance should not diminish the government’s constitutional responsibility to reduce poverty and provide social protection.
“The amendment to the Zakat Law, which is already listed in the 2025-2029 Prolegnas, especially after Constitutional Court Decree Number 97/PUU-XXII/2024 allowed up to two years for legislative amendments, must be leveraged to establish fairer, more effective zakat governance, aligned with constitutional mandates. One crucial proposal worth serious consideration is treating zakat as a tax credit rather than a mere tax deduction," HNW stated on Tuesday, July 21, 2026.
Consistent With Islamic Principles
From an Islamic perspective, Executive Board of Nahdlatul Ulama (Pengurus Besar Nahdlatul Ulama/PBNU) Chairman Yahya Cholil Staquf, also known as Gus Yahya, said no provision in Islamic law prohibits corporate zakat from being treated as a tax credit. According to him, whether such a policy is adopted is a matter for the government to decide. If adopted, it could serve as a fair incentive for Muslim taxpayers who fulfill both their religious and civic obligations.
"Well, from the perspective of Islamic law, there is no specific religious provision that prohibits such an arrangement,” Gus Yahya said at the PBNU headquarters on Wednesday, July 22, 2026.
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