Analysis impact of zakat fiscal policy on economic growth in Malaysia ( 1991 - 2006)

Abstract

This paper attempts to examine the role of zakat fiscal policy in Malaysia and its impact on the economy at the macro level. using the OLS, TSLS, and ECM analysis. In Malaysia zakat is used as a fiscal policy tool whereby income tax payers were given 100 per cent rebates on zakat that they paid. This study finds that zakat has a positive and significant relationship with economic growth, consumption and small business investment respectively. Although the zakat impact is small this study shows that zakat can be used as a fiscal policy tool just like the income tax.