An empirical study of business zakah compliance in Yemen: The moderating role of trust

In Muslim countries, apart from income tax, Zakah collection plays a significant role in the national economic and community development. However, the noble socioeconomic objectives of Zakah in most Muslim states, including Yemen, have so far remained a mirage, as the collected Zakah funds failed to bring out the destitute poor from the poverty trap. The amount of Zakah collected from Zakah payers in Yemen is not satisfactory, nor is the level of compliance among business owners. The main objective of this study is to investigate the factors that influence business Zakah compliance behavior. The research framework was developed based on Fischer’s Model of tax compliance (predominated by economic-social psychological factors) and has been cautiously adapted to suit the Zakah environment. The influence of Islamic religiosity as well as the moderating effect of trust in Zakah authority were also incorporated into the study because of their relevancy in a religious context like Zakah. Using a quantitative approach, this study employed a self-administered questionnaire survey on 500 businesses, yielded a 54.8% response rate. The results of Partial Least Square-Structural Equation Modeling (PLS-SEM) revealed a significant influence of Zakah law complexity, Zakah fairness, peer influence, Zakah moral and religiosity on Zakah compliance. The findings further found trust-moderated interactions of Zakah law complexity, peer influence, Zakah moral and religiosity on compliance behavior are statistically significant. Overall, the novelty of this study is pioneer in providing an empirical evidence to the scanty literature, especially on the applicability of the Fischer’s Model in Zakah field, as a viable framework for a better understanding of Zakah compliance. This would also be a guide for a successive compliance strategy that Zakah authorities in Muslim states and Yemen in particular could implement.