Consumption Tax Policy Responses in Indonesia and Malaysia: An Islamic Economic Perspective on Global Uncertainty

Abstract

Introduction: This study examines the impact of taxation policies on economic growth within the framework of Islamic economics in developing countries, focusing on Indonesia and Malaysia. It highlights the role of tax reforms and Islamic finance development amid digital transformation.

Methods: A qualitative analysis was conducted using secondary data from government reports, academic articles, and policy documents. The study compares tax administration reforms and Islamic economic initiatives in both countries.

Results: Indonesia’s tax reforms show mixed results with initial revenue contraction due to new system implementation but indicate recovery potential. The Islamic finance sector in Indonesia has room to grow but faces integration and digitalization challenges. Malaysia demonstrates more advanced integration of fiscal incentives and technology, supporting stronger Islamic economic growth.

Discussion: Findings suggest tax policies must balance revenue needs and investment incentives while improving digital infrastructure and regulatory frameworks. Lessons from Malaysia can guide Indonesia to enhance Islamic economic contributions to growth.

Conclusion: Strategic tax policy and Islamic economic development can drive inclusive growth in developing countries. Success depends on coherent policies, institutional support, and technology adoption.

Novelty: The study uniquely links tax policy with Islamic economics in a comparative context, offering insights for emerging economies.