Only 1 in 4 Malaysia Federal Territories companies pay business zakat

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Only 1 in 4 Malaysia Federal Territories companies pay business zakat

By Habhajan Singh Available at:

Some 4,000 companies registered in the Federal Territories (FT) are eligible to pay business zakat estimated around RM46 million, but at the moment only one in four are fulfiling their zakat obligations. Pusat Pungutan Zakat (PPZ) MAIWP, the body entrusted to oversee the collection of zakat in the FT, has set its sight on reaching out to these eligible corporations to encourage them to fulfil their zakat obligations. PPZ, established by the Federal Territory Islamic Religious Council, is better known locally by its Malay acronym MAIWP, and began operations in 1991. It practises a corporate style of management combined with a computerised collection system, proactive marketing and customer-oriented approach.

In a recent interview, PPZ general manager Mohd Rais Ali identified reaching out to the board of directors of these eligible corporations as one of its challenges in the coming years.
He said that an internal survey showed that there are 43,266 companies registered in the FT, which covers Kuala Lumpur, Putrajaya and Labuan. Out of this, it identified 13,055 companies with Muslim shareholders to be eligible to pay business zakat. In 2008, 1,060 companies paid zakat on business. “That’s only 27%. If all companies pay (business zakat), PPZ can collect RM45.92 million,” he told The Malaysian Reserve. Zakat on business is levied at the rate of 2.5% on the zakatable assets of a business, which include the value of the net current asset and the short-term investment as shown in the balance sheet. Last year, total collection for zakat nationwide was RM1.03 billion, with PPZ collecting RM206 million. Besides business zakat, the other types of zakat include zakat on income, savings, shares, gold, crops, livestock and self (zakat fitrah). PPZ’s business zakat amounted to RM28.7 million in 2008.

On the payment mode, Mohd Rais said that zakat through salary deduction is the most popular means and it contributes to about 70% of the organisation’s collection. “It’s almost a fixed income (for us). We get some RM12 million from about 40,000 payers annually. Of course, the 20-80 pareto rule applies here, as well,” he said. The pareto principle, also known as the 80-20 rule, states that, for many events, roughly 80% of the effects come from 20% of the causes. Business management thinker Joseph M Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who observed that 80% of the land in Italy was owned by 20% of the population. When dealing with PPZ, he said most employers now bank in direct their zakat payments, making the transaction cashless.

PPZ, set-up via a company named Hartasuci Sdn Bhd, is placed under a foundation cal led Yayasan Taqwa Wilayah Persekutuan and is controlled by MAIWP. Its basic responsibilities are to collect zakat for the council and raise zakat awareness amongst Muslims. Since its inception, PPZ has experienced many changes and improvements in its administration by passing bureaucratic procedures as well as adopting a customer-oriented and pro-active marketing approach. “We provide multiple channels for people to fulfil their zakat requirements. Since 1991 until now, we have introduced various modes of collection. We have, for example, zakat through salary deduction and cheques. “At on time, you had to personally go to Baitumal Malaysia offices. Today, you can walk into any bank branch or post office to make the payment. We have also started kiosks at selected mosques,” he said. PPZ’s board of directors, chaired by Datuk Mustafa Abdul Rahman, includes Datuk Che Mat Che Ali, Dr Sohaimi Mohd Salleh and Dr Didi Indra Tjahja. Some of senior management team members are Abdul Hakim Amir Osman (operation manager), Mohammed Hassan (assistant operation manager), Azhan Ismail (finance, investment & development manager) and Azrin Abdul Manan (management & human resource manager).

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