Evaluation of Zakat as a Public Finance Instrument

Abstract

Zakat institution has a special place both politically and financially in the history of Islam. Zakat, as worship, is located beyond as an instrument of public finance, and a distinct institution compared to tax. However, in the modern period, Muslim countries adopt zakat institution into the state bureaucracy as a public finance tool through centralizing the zakat institution and governing it via state apparatus. In this study, we critically explore the role of zakat as a public finance tool and examine how it is implemented in two Muslim nation-states, namely Malaysia and Indonesia. Although these nation-states might aim to fulfill political and financial goals through integration of zakat institution into the state bureaucracy, it is argued that zakat worship should be practiced as a strong bond in society’s dynamics, and its centralization by the sovereign authority leads to the diminishing of such bond and increase the dependence of citizens on the state.