Do Enforcement, Religiosity and Peer Influence Zakah Compliance Behavior?

Abstract

Although Zakah (Islamic tax) is considered to be a cornerstone of Islamic social system and mechanism for eradicating poverty among Muslim communities, the realization of noble socio-economic objectives of Zakah in most Muslim countries have so far remained a mirage. They are unable to bring out the destitute poor from the poverty trap and help the oppressed to be a self-reliant as possible. Low Zakah collection is one of the most crucial reasons behind this phenomenon. Yemen, for instance, is one of the poorest low-income countries in the world. In such a hard situation, Zakah has failed to appropriately fit as a fiscal instrument in fighting the plight of poverty. Therefore, this study aims to examine the determinants of Zakah payers’ decision to comply with Zakah laws. A Survey questionnaire was administered to 500 business owners (Zakah payers) out of which 274 usable questionnaires for further analysis. Based on PLS-SEM outcomes, the study revealed that Islamic religiosity and peer influence are significantly related to business Zakah compliance, while law enforcement had no influence on compliance. The findings are relevant to Zakah authorities in Yemen and Muslim countries to focus their attention on formulation of policies to further boost Zakah collection.