MASTER IN ISLAMIC BANKING AND FINANCE

PRESENTATION BY:NURUL NADIA BT ABDUL RASHIDNIK NAINUNIS BT ABDUL GHANI

NOR HAFIZAH BT SAMANAL

ISLAM & TAXATION

ISLAM &TAXATION

Introduction

History Of Taxation

Malaysia Tax Legislation

Types Of TaxationOpinion about Taxation

Important Role of Taxation

Conclusion

INTRODUCTION

Tax is a contribution obtains by Government as revenue. Tax payer is only be imposed by the law on an individual or business i.e.: corporate, sole-proprietorship or partnership when their income attracts taxation.

The tax regime in Malaysia was introduced by the British Colonial Government in Malay Peninsula in 1948, in Sabah and Sarawak is 1957 and in 1961 respectively.

HISTORY OF TAXATION

1917-1922

• Due to the unfavourable of the 1910 draft bill, proposal to introduce income tax were concealed in the more agreeable language not raising revenue, but to fund the imperil war expenditure.

1923-1940

• There was no income tax in the Straits Settlements

Post 1945

• The Special Tax Adviser to the Government was appointed in 1946 to draft tax legislation for Malaya. He completed a comprehensive report in the following year. The Income Tax Ordinance 1947 took effect from 1 January 1948

CONT…

Income Tax Ordinance

1947

• The provision of the ordinance were based substantially on the model colonial Territories

Income Tax Act 1967

• The ITA 1967 actually consolidated the three laws of income Taxation then existing in Malaysia

MALAYSIAN TAX LEGISLATION

INCOME TAX ACT 1967

Section 2(7)

Section 6A (3)

Section 18

FUNCTION OF INLAND REVENUE BOARD OF MALAYSIA (IRBM)

Act 533 INLAND REVENUE BOARD OF MALAYSIA ACT 1995

FUNCTION IRBM

To act as agent of the

Government and to provide

services in administering

To advise the Government on matters relating

to taxation

To participate in or outside

Malaysia in respect of

matters relating to taxation

May act as a collection agent

for and on behalf of any body for the recovery of

loans due for repayment

EFFECTS OF TAXATION

Personal income

Tax

Corporate income

tax

THE CHARACTERISTIC OF THE TAXATION

The characteristic of the taxation

Cash

Enforced contributio

n

Proportionate in

character

Levied for public

Types of taxation

Types of Taxation

Islamic Taxation

Kharaj

Jizyah

Ushr’

Others Taxation

Personal Income

TaxCorporate

Income Tax

Sales and Service

Tax

• Kharaj is the levy on land produce in the non-Muslim which was conquered by the Islamic state as payment to the Islamic state.

Kharaj

• Jizyah where imposed on non-Muslim by Islamic state as a protection given to them and their properties as well.Jizyah

• The Ushr will be charge if he or she cultivates the land on their own. If their agricultural destroyed due to natural calamities or theft, no Ushr is charge.

Ushr’

ISLAMIC TAXATION

• Any individual who has income accruing in or derived from Malaysia or derived from outside Malaysia.

Personal Income Tax

• This tax special for resident companies are subject to tax on income accruing in or derived from Malaysia.

Corporate Income Tax

• Current sales tax is a single stage imposed at the import or manufacturing levels.

• A service tax was introduced in Malaysia at 1972. It applies to certain prescribed goods and services in Malaysia.

Sales and Services Tax (SST)

OTHER TAXATION

OPINION ABOUT TAXATION

First view

• Some Ulama allow the existence of tax policy.

• Basic principles of the Zakat system.

• Not contradicted with the Shari’ah principle

Second view

• Some Ulama argues that the tax is haram.

• Taxes are not allowed it will abuse and become tool of oppression

The Important Role of Taxation

Maximize allocation of resourcesThe revenue is due on various productive sectors in the country in order to increase the country growth

Raising government revenueThe increases in tax collection will cause the increase of the government revenue

Encouraging savings and investmentmixed economy -promoting capital formation and investment for public and private sectors

Cont…

Accelerating the economic growthTax policy used to handle critical economic situation

Control the mechanismTaxation is the only effective weapon which private consumption can be constrained and thus resources transferred to the state to ensure sustainable development.

Reducing the inequities of income and wealthusing an efficient tax system.

Zakat and savingdepend on the nature of

consumption function that the society follows in its

consumption behavior

Zakat and poverty eradication

to help the needy people especially to the Muslims

nation

Zakat and income distribution

redistribute the resources from the rich people to the

unfortunate society

Role and function of zakat

The social area

• to reduce poverty • those countries

wealth is largely controlled by a group of elites who do not care for the poor

• become worst if these elites not to levy zakat

• the rich live up to their society responsibility

The moral area

• “washes away the greed and covetousness of the rich”.

• important role of zakat in encourages and also impresses a sense of moral responsibility on the rich to look after the poor

• to restrain meaningless of greed, selfishness and covetous

Role and function of zakat

Conclusion

• Most of the country implements taxation to increase their income. From an Islamic perspective, the collection of taxation is not prohibited, but the rulers should give the clear explanation.

• The taxation to Muslim should be not compulsory because Muslim are obliged to pay zakat. But, the ruler has their own opinion to collect taxes. There are some requirement for government in implementation of taxation.

Thank you