Islamic Legal Reasoning for the Justification of Tax Evasion: The Case of Indonesia

Religiosity is often perceived as a trait that can effectively suppress attitudes and behavior that lead to people evading taxes. However, this study finds that Islamic religiosity has a complicated relationship with tax evasion. This study employs a mixed-method, which involves collecting, analyzing, and integrating quantitative and qualitative research, and this integration provides a better understanding of the research problem. Qualitative analyses of the sermons of prominent Islamic clerics speaking on taxes on YouTube channels revealed different views. The textualists/conservative clerics viewed taxes are prohibited based on the fact of Islamic history and tax prohibition stated in a hadith. Furthermore, tax compliance is determined solely by the threat of punishment from the government. On the other hand, the moderate preachers seem to be more flexible in response to tax issues. They involve the framework of contextual and analogical-historical practice. Quantitative analyses from the survey found that Islamic religiosity is not directly correlated with tax evasion. However, the sentiment of Islamic law adoption by the state has significantly mediated the correlation between them. In addition, respondents who affiliate with moderate Islamic organizations tend to have less justification of tax evasion than those who affiliate with conservative organizations or movements.