Islamic Economic Perspectives on Tax Policy: A Comparative Study of Indonesia and London

Abstract

Introduction: Tax policy is a crucial tool for economic development, social welfare, and SME growth. This study compares tax policies in Indonesia and London from an Islamic economic perspective. In Indonesia, the focus is the MUI Fatwa No. 2/MUNAS XI/MUI/2025 on Fair Taxation, emphasizing justice, transparency, and public welfare. In London, 2026 fiscal measures, including corporate tax reforms, Making Tax Digital (MTD), inheritance tax adjustments, and SME incentives, are analyzed.

Methods: A qualitative comparative case study was conducted using document analysis of tax regulations, government reports, and Islamic legal sources, supported by interviews with SME owners and tax officials. Thematic analysis examined compliance, policy effectiveness, and socio-economic impacts.

Results: Tax policies significantly influence SME compliance and growth. Indonesia’s Sharia-compliant framework fosters voluntary compliance and social welfare, while London’s digital reporting and targeted incentives enhance transparency, efficiency, and investment opportunities. Comparative analysis shows that ethical legitimacy combined with effective administration strengthens trust and sustainable economic outcomes.

Discussion: The study highlights the interaction of normative principles and administrative capacity. Indonesia’s ethical-religious approach and London’s technology-driven system provide complementary insights for hybrid tax governance balancing fairness and efficiency.

Conclusion: Integrating ethical principles with efficient administration can enhance SME development, revenue collection, and public trust.

Novelty: Offers a comparative perspective on Sharia-based ethics and conventional fiscal reforms, proposing hybrid tax governance models for sustainable and equitable economic growth.