COMPLIANCE BEHAVIOUR OF ZAKAT ON SALARY INCOME AMONG MUSLIM

YOUTH IN KLANG VALLEY

Teh Suhaila Tajuddin, Aza Shahnaz Azman & Noraini Shamsuddin

Faculty of Management and Muamalah
International Islamic University College Selangor (KUIS)
tehsuhaila@kuis.edu.my, azashahnaz@kuis.edu.my & noraini.shamsuddin@kuis.edu.my

ABSTRACT

Several previous studies showed that the level of zakat compliance varies by different age groups.
When age and the income increased, the awareness to pay zakat is also increased. However, the
compliance behaviour among youth to pay zakat is low, and there is no assurance that the zakat
compliance level will increase as the age increases. If the level of compliance does not improve, then
the potential to improve the zakat collection in the future is small. Therefore, it is very crucial to study
the level of compliance behaviour on zakat among youth and to identify factors influencing their
obligation towards zakat payment. This study was conducted to identify factors influencing zakat
compliance behaviour among youth in Klang Valley. Data from 437 respondents were analysed using
Exploratory Factor Analysis (EFA) and Confirmatory Factor Analysis (CFA). The results showed that
the youth understanding on zakat and facilities factors influenced the zakat compliance behaviour on
salary income significantly. An important implication of the study is that zakat understanding among
youth should be given high priority to further improve the level of zakat obligatory. Gazetting the law
of zakat would be implemented in addition to reduce the non-obligatory.

Keywords: Zakat compliance, zakat on salary income, youth and understanding about zakat.

1. Introduction

The obligation to pay zakat is clearly explained in the Quran and Sunnah. However, many Muslims do
not care and refuse to pay zakat on the income they earned (Ab Rahman, Mohd Sobali, & Syed
Omar, 2012). Various parties should pay serious attention and take proactive measures in addressing
the issue of reluctance to give zakat. Therefore, compliance of giving zakat is necessary to be applied
at the early age of every Muslim. Each Muslim individual must learn relevant knowledge of zakat to
enable them to understand and to further implement the obligatory of giving zakat. Jaffar, Affif,
Amri & Sahezan (2011) explained that age is a demographic factor that influences the awareness of
giving zakat and ultimately gives a positive impact on the compliance behaviour of giving zakat. The
increase of age in line with income raised the awareness to pay zakat. Many Muslim individuals tend
to pay zakat only when their age and income increase.

There are many Muslims who only paid income tax but did not pay zakat on income even though
they met the obligation of giving zakat (Muda, Marzuki & Shaharuddin, 2006). They give more
priority to pay tax than the zakat because they feel the law enforcement and tax compliance are very
clear and often publicised to the general public. Moreover, according to Muda, Marzuki &
Shaharuddin (2006), this situation is caused by lack of motivation towards paying zakat. Meanwhile,
Md Idris (2002) in his study stated that employees who are subject to scheduler tax are

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automatically eligible to pay zakat on income. This is because their salary income is among those
who have income that exceeds nisab, which is about RM3, 000.
There are many previous studies regarding the factors influencing zakat compliance on earnings or
salary income among Muslims in Malaysia (Md Idris, 2002; Muda, Marzuki & Shaharuddin, 2006; &
Wahid, Ahmad & Mohd Nor, 2007). However, no specific study that targets youth as the subject in
the study, particularly on the compliance of zakat on salary income. By considering several previous
studies that emphasized the potential of youth and the importance of age factor in the compliance
of zakat (Wahid, Mohd Nor, and Ahmad, 2005; Wahid, Ahmad & Mohd Nor, 2007; and Jaffar, Affif,
Amri & Sahezan 2011), thus, this study was conducted to identify factors influencing zakat
compliance on salary income among Muslim youths in Klang Valley.

2. Zakat Compliance among Muslim Society in Malaysia

Compliance attitude is heavily influenced by external and internal factors of an individual. Each of
these factors influences the view and compliance of an individual in carrying out religious obligatory.
Compliance of zakat payment is closely related to religious obligations. Although the zakat on salary
income is considered ikhtilaf property but it is still categorised as a compulsory zakat based on the
fatwa in respective states. Therefore, individuals who did not pay zakat on salary income are
considered as disobeying his or her religious obligatory (Wahid, Ahmad & Mohd Nor, 2007).
Therefore, this action represents disobedience to the religious obligatory and less piety of the
respective individual (Ghazali, 1998). According to Qardawi (1998), disobedience to religious
obligatory is closely related to the piety factor.

Mohd Nor, Wahid, & Md. Nor, (2004) analysed the study on the awareness level of paying zakat on
salary income among professionals. The study found the piety and knowledge of the zakat law
greatly influenced the compliance of giving zakat. This is proven by the results of the study from
Ahmad & Wahid (2005) who found that most individuals are willing to pay zakat due to internal
factors of piety and faith. Therefore, fulfilling the obligatory of zakat on salary income or earnings is
considered as fulfilling the religious obligatory and is no longer seen as a burden.
According to Mohd Hassan (1998), there are some individuals who assume payment of tax is
equivalent to the payment of zakat. However, the fact is that the actions of both obligators are
clearly very different because the tax instrument acts as one of the elements in improving the
country's economy.

3. Understanding of Giving Zakat

Generally, in Malaysia, zakat on salary income is compulsory as decided by the National Fatwa
Council 1997. However, Perak is the only state that does not obligate zakat on salary income since
2004. Although there are discrepancies of fatwa from the point of law, efforts to educate the public
on the importance of zakat on salary income need to be done since there are people who pay zakat
on income even though they reside in the state that does not impose the obligatory (Wahid, Ahmad
& Mohd Nor, 2007) and vice versa. This condition is because the compliance in paying zakat is closely
related to piety factors (Ghazali, 1998; Qardawi, 1998).

Awareness and compliance to pay zakat can be increased if relevant knowledge of zakat is
continuously given to all walks of life, whether formal or informal. This is proven through studies by
Mohd Nor, Wahid, & Md. Nor (2004) who studied the awareness factors of paying zakat. The study
found that zakat knowledge and piety are the factors of tendency of a Muslim to pay zakat. The
knowledge contributes in increasing piety and subsequently gives awareness to individuals for
paying zakat.

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The knowledge of zakat is often correlated in studies regarding awareness, determinant factors, and
motivation of paying zakat. For example, the study of Abu Bakar & Abdul Rashid (2010) found that
internal support factors such as social responsibility towards the community and awareness on the
existence of the right of others on the income earned are major factors of the respondents to pay
zakat. Researchers also concluded that the above two factors are closely related to the importance
of spreading knowledge and education of zakat to the public.

Other several studies (Saad, Bidin, Md. Idris & Md. Hussain, 2010; Jaffar, Affif, Amri & Sahezan, 2011)
also indicated the importance of knowledge as a driving factor for paying zakat. Mohd Nor, Wahid,
and Md. Nor, (2004) indicated that the level of individuals’ awareness is closely related to piety and
also the level of knowledge about zakat.

4. Convenience of Zakat Payment Mechanism

Wahid, Mohd Nor & Ahmad, (2005) found that the easier zakat payment mechanism, the higher
amount of zakat can be collected. Zakat collection and distribution process are continuous processes
that should be undertaken by zakat institution systematically, trusty, and efficiently. Therefore, the
medium or channels of zakat payment that are relevant to the current situation need to be
introduced to the Muslim community. However, in the meantime, the conventional method of
payment is not waived. This is because the integration of the method of traditional and modern
zakat payment is able to boost the amount of zakat collection every year.

In terms of convenience to pay zakat, various technology systems have been developed and
prepared for the convenience of taxpayers. Close cooperation between the agencies and various
parties has been established to widen the zakat payment facilities such as banking institutions,
statutory bodies, tertiary education institutions and others as zakat collection agencies. Today, the
payment of zakat can be made easily and quickly. In addition to the payment of zakat paid over the
counter at the existing zakat collection offices, zakat payment can also be made through an online
payment system provided by various banks, ATM systems, SMS, mobile counter service and others.
For government servants and private sector workers, the implementation of zakat can also be made
through scheduled payroll deduction system by completing a special form provided by the zakat
collection centres in respective states.

5. Theoretical Framework

This study attempts to estimate the probability of a relationship between the level of compliance of
giving zakat as a latent variable and observation variables involving the perception of youth towards
six factors that are expected to influence the level of compliance of giving zakat. These include the
factors of understanding about zakat, convenience of the facilities provided by zakat institutions,
respondents’ commitment, trust towards zakat institutions, perception towards tax system, and
zakat law enforcement. This study will identify the key factors affecting respondents’ decision to
implement zakat on salary income.

6. Methodology
6.1 Sample and data collection method

Youth with salary income earned in the private sector is the unit of analysis in this study. 600
questionnaires were distributed. Only 450 questionnaires were returned by the respondents, but 13

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had to be rejected due to incomplete responses and incompletely answered. Therefore, a total of
437 questionnaires were analysed.

As there is a large population among private companies in Klang Valley, the cluster sampling method
by industry was used. Questionnaires samples were distributed to several companies including
public and private limited companies.

6.2 Instrumentation

The survey method was implemented for the purposes of quantitative research data collection.
Questionnaires were used as the research instrument to obtain primary data. Construction of the
questionnaires was based on the identified variables and all factors were analysed via Confirmatory
Factor Analysis (CFA) test, which is classification of questions based on feedbacks from respondents.

7. Findings and Discussion

7.1 Reliability analysis

Results of the factor analysis using the CFA method found that each category of the questions could
be summarized to form six identified factors, namely the understanding about zakat, convenience of
the facilities provided by zakat institutions, respondents’ commitment, trust towards zakat
institutions, perception towards tax system, and zakat law enforcement. The levels of usability and
reliability (Cronbach’s alpha) for each of these factors were analysed. The findings in Table 1 indicate
that the highest levels of Cronbach’s alpha for reasons for compliance in paying zakat on salary
income are the understanding about zakat (0.919) and followed by convenience of facilities (0.879).
Reliability towards these variables is important because it influences the perception of respondents
in assessing the questions.

Table 1: Reasons for Compliance in Paying Zakat on Salary Income

Factors Cronbach Alpha (α )
Understanding about zakat 0.919
Convenience of facilities 0.879

7.2 Descriptive statistics and analysis

For data analysis, descriptive statistics (frequency, mean, and percentage) and statistical inference
(regression test, significant test) were performed using SPSS. The findings showed that the majority
of respondents are female (53.1%). The highest age group of respondents is from 26 years old to 30
years old (42.6%) and they are holding executives post (57.4%). It is interesting to note the majority
of the respondents are classified as junior executive as majority of them are having working
experience which is less than three years. Even though they are still new in their job, they are
already qualified to pay income tax as majority of them earned estimated monthly household
income between RM3,001 to RM6,000. Therefore, it is predicted that the same group of
respondents should also eligible to pay their zakat on salary income that they have earned.
The details of the background information of the respondents obtained was collected and presented
in Table 2:

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 Table 2: Demography Characteristics of the Respondents
No. Variables Frequency Percentage
(%)
1 Gender Male 205 46.9
Female 232 53.1
2 Age 21 to 25 years old 59 13.8
26 to 30 years old 182 42.6
31 to 35 years old 103 24.1
36 to 40 years old 83 19.4
3 Position Executive 234 57.4
Non-Executive 174 42.6
4 Industry Electricity and gas supply 42 9.7
Construction 3 0.7
Mining and exploration 31 7.2
Agriculture 36 8.4
Transportation and
161 37.4
communication
Financial 73 16.9
Education 3 0.7
Others 82 19.0
5 Working Experience Less than 3 years 94 21.6
3 - 4.9 years 84 19.3
5 - 6.9 years 76 17.4
7 - 9.9 years 48 11.0
More than 9 years 134 30.7
6 Employment Status Permanent 387 88.6
Temporary 50 11.4
7 Status of Marriage Bachelor 178 40.7
Married 259 59.3
8 State of Residence Selangor 342 78.3
Wilayah Persekutuan 67 15.3
Others 28 6.4
9 Highest Education SPM, PMR/SRP, Certificate
76 17.4
Background and below
Diploma and TPM/STAM 125 28.6
Bachelor Degree 199 45.5
Master and above 37 8.5
10 Estimated Monthly Less than RM3,000 163 37.4
Household Income Between RM3,001 and
182 41.7
RM6,000
Between RM6,001 and
54 12.4
RM9,001
Between RM9,001 and
27 6.2
RM12,000
Between RM12,001 and
6 1.4
RM15,000
More than RM15,000 4 0.9
11 Number of Children 1 child 57 30.5
2 children 65 34.8
3 children 44 23.5

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 4 children 13 7.0
5 children 7 3.7
6 children 1 0.5
12 BRIM Recipient Yes 77 17.8
No 355 82.2
13 Income Taxpayer Yes 292 68.4
No 135 31.6
14 Zakat on Salary Yes 179 41.2
Income Payer No 255 58.8

Testing using structural equation modelling (SEM) method was also conducted to identify the
level of respondents’ behaviour on dependent variable, which is the compliance of respondents
towards the payment of zakat on salary income. Table 3 indicates the understanding about zakat
factor contributed by six main items based on the capacity and communality values of a close
relationship with compliance variables. The highest capacity score (0.802) corresponds to the
item of fulfilling the rights asnaf who are in need and secondly is zakat can purify wealth (0.781).
In conclusion, the results of the understanding factor analysis showed that respondents fulfilled
the obligatory of zakat on salary income based on the encouragement to fulfil the religious
obligatory.

Table 3: The Test Results of Factor Analysis for Understanding about Zakat Factor
Items Capacity Mean1 Communality
factor
(1) Awareness on other’s rights on income 0.696 4.37 0.530
(2) Believe in the blessings of paying zakat 0.613 4.56 0.554
(3) Seek for the pleasure of Allah SWT 0.722 4.74 0.535
(4) Fulfilling the rights of asnaf who are in need 0.802 4.66 0.678
(5) Zakat purifies wealth 0.781 4.65 0.635
(6) Zakat develops the economy of Muslim’s community 0.767 4.62 0.638

Note: Mean based on Likert scale score; score 1=strongly disagree to score 5= strongly
agree
Bartlett’s test of sphericity: Significance on 1%
Cronbach’s alpha (α) = 0.919; score= 0.70 and above explained the integrity of scale

Table 4 indicates the facility factor contributed by five main items based on the capacity and
communality scores of a close relationship with compliance variables. The highest capacity
factor refers to the item of zakat counter can be found easily (0.816) and facilities at the zakat
collection centres use modern and easy applications (0.755). In conclusion, the test results of
facilities factor analysis showed that respondents were more likely to use technology that is
easily accessible.

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 Table 4: The Test Results of Factor Analysis for Facility Factor
Items Capacity Mean1 Communality
factor
(1) Zakat counter services are efficient 0.647 4.16 0.642
(2) Zakat counter can be found easily 0.816 3.92 0.737
(3) Using modern and easy applications 0.755 4.00 0.659
(4) Many zakat agents and easily reachable 0.728 4.09 0.632
(5) Satisfied with the information of zakat on salary 0.717 3.99 0.650
income
Note: Mean based on Likert scale score; score 1=strongly disagree to score 5= strongly
agree
Kaiser-Meyer-Olkin measures of sampling adequacy =0.872
Bartlett’s test of sphericity: Significance on 1%
Cronbach’s alpha (α) = 0.879; score=0.70 and above explained the integrity of scale

Regression analysis in Table 5 presents the relationship of variables between compliance and
understanding about zakat, which shows a significant relationship on the reasons of compliance
in giving zakat. For respondents who already complied with this third pillar of Islam, they
consider awareness or information of zakat did not have an impact on them as they believed
that zakat is a pillar of mandatory. Meanwhile, for the variables of zakat payment facilities
provided by the zakat institution, the analysis justified that this factor did not influence the
compliance of giving zakat. The diversity of zakat payment facilities either online or offline did
not influence the decision of youth to perform zakat on salary income. The level of dispersion for
both variables is based on the beta levels of 0.715 and 0.062. These levels define that when
understanding increases by one unit, the level of compliance increases automatically by 71.5%.

Table 5: Regression Analysis

Reasons of Compliance in Paying Zakat on Salary Income
Beta S.E C.R Sig
compliance <--- understanding 0.715 0.089 8.029 0.000
compliance <--- convenience 0.062 0.062 1.004 0.315
***Indicate highly significant at <0.001

8. Conclusion and Future Recommendation

Based on the findings of the study through factor analysis using CFA methods, the understanding
about zakat is the main factor that influences the compliance of zakat on salary income among the
respondents. It is represented by the highest Cronbach’s alpha (α) score of 0.919, which shows the
respondents performed the obligatory of zakat on salary income based on the encouragement to
fulfil religious obligatory. Regression analysis showed that there was a significant relationship

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between respondents' compliance and understanding of zakat. It explains that the respondents
complied with the third pillar of Islam remained committed in performing the obligation of zakat on
salary income and they considered awareness or information of zakat did not influence their
decision in giving zakat. In addition, regression analysis also proves that there was no significant
correlation between respondents and convenience of facilities for zakat payment. The level of
dispersion for both variables is based on the beta levels of 0.715 and 0.062. These levels define that
when understanding increases by one unit, the level of compliance increases automatically by
71.5%.

Several strategic measures have been identified as a result of the findings on the study. Zakat
institutions should provide understanding to the public that individuals who have paid the zakat on
salary income are eligible for a rebate for the zakat paid in the taxation system in Malaysia. The
results from the findings of the study indicate that most respondents (59.7%) did not know about
the rebate that can be claimed in the individual tax. They believed that once they have paid the
income tax, then they do not have to paid zakat on income. This judgement confirmed that they
have a lack of understanding towards zakat rebate and lack of attention towards the special
treatment given by Inland Revenue Board of Malaysia to the zakat payers in respect of the zakat
paid. In Malaysia, for an individual who wants to pay income tax based on chargeable income
earned, the income tax to be paid can be further reduced by claiming the zakat rebate with
condition that the zakat is already paid during the assessment year. However, the rebate amount
cannot be exceeding the total tax to be paid. So, it is clearly indicated that there is no issue on the
double assessment on the same source of income by Muslim individual.

The implementation of legal action is also necessary if a Muslim fails to pay zakat on salary income
and other properties. There is no doubt that ongoing dakwah and campaign efforts are optimised by
the management of zakat and the results are very encouraging with the increase in the collection of
zakat every year. However, if these efforts are yet to give total awareness to the public, it is
desirable that law enforcement action is to be undertaken.

Acknowledgement
This paper is under the research grant of the International Islamic University College Selangor.

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