FINAL EXAM, EVEN SEMESTER, 2019/2020 
                                                    FACULTY OF ECONOMICS AND BUSUNESS 
                            INTERNATIONAL PROGRAM FOR ISLAMIC ECONOMICS AND FINANCE 
                                                                                 (IPIEF) 
                                               UNIVERSITAS MUHAMMADIYAH YOGYAKARTA 
                                                                                                                                                                        
                          
                         SUBJECT                         FISCAL ECONOMICS OF ISLAM 
                         LECTURER                        Muhammad Shulthoni, Lc., MA., MSI 
                         TIME                            90 Minutes 
                         DAY/DATE                        Friday, 17 May 2019 
                         VENUE                           PS.407 
                         DEPT/PROGRAM                    Economics - IPIEF 
                         TYPE/RULE                       Closed Book 
             -  Please pray before and after doing your exam!                                               
             -  Read carefully every single question, and provide your answers on the available sheets!  
             -  You may use dictionary to help answer your exam! 
             -  Any form of cheating is NOT entertained. Therefore, this exam is considered VOIDand  will be calculated 
               in your final results. 
              
             Question 1 (30 Marks)  
             Fiscal policy in an Islamic economy would be used to achieve the same objectives as in non-Islamic economies 
             (i.e. the objectives of economic stability, growth and an acceptable distribution) plus other objectives which are 
             embodied in the Islamic doctrines or must be achieved in order to apply the Islamic laws. At least three of these 
             objectives can be distinguished. 
                  a.   Islam establishes a higher degree of economic equality and democracy through, among other principles 
                       and laws, the basic principle that “wealth should not be permitted to circulate amongst the wealthy only”. 
                  b.  Since Islam prohibits the payment of interest on any type of loan, it follows that an Islamic economy 
                       would not be able to manipulate the rate of interest in order to achieve equilibrium in the money market. 
                  c.   An Islamic economy would be committed to assist other less-developed Islamic economies and to spread 
                       the message and teachings of Islam as widely as possible. 
                       Please explain these objectives according to your understanding! 
                   
              
             Question 2 (30 Marks) 
             An Islamic  economy may be characterized as a three-sector  economy.  It  will  comprise  of  the  private  sector 
             motivated by profit, the private sector free  of  any profit  motive  (the  voluntary  sector)  and  the  public  sector. 
             Alternatively,  we  may  describe  the  three  institutions  as  the  market,  voluntary  economic  institutions,  and  the 
             government. The three-sectoral characterization of the Islamic economy derives from the value premise of an 
             Islamic society which involves the voluntary flow of a sizable part of its total resources in such activities as are 
             considered to attain the welfare of AI-Akhira but have significant economic implications for the society. In the 
             voluntary sectors there are  
                  a.   Zakat 
                  b.  Waqf  
                  c.   Infaq 
                  d.  Sedekah 
             Please explain these elements that can be the complementary to modern taxation! 
              
             Question 3 (30 Marks) 
             How do the islamic fiscal tools work to achieve:  
                   a.  Full employment,   
                   b.  To curb inflation and   
                   c.  To mobilize savings in order to accelerate economic growth?  
              
             Question 4 (40 Marks) 
             In the final analysis, hopes for a brighter future in Muslim countries are integrally linked with the scope for reform. 
             Although the external environment is important, the first step is for Muslim countries to put their own houses in 
             order and implement taxation and expenditure policies that reflect the norms of equity and the aspirations of their 
             own people. This means work on a number of fronts: rethinking governance, re-establishing supremacy of law, 
             reforming  taxation  in  line  with  domestic  income  and  wealth  profile  and  economic  priorities,  facilitating  an 
             appropriate investment profile and climate, and reconsidering expenditure priorities. According to the article, there 
             are policy recommendations (agenda for action) that correspond with the original vision of Islam, starting with the 
             connection between taxation and governance.  
             Part I  
                  a.   Gain the Trust and Confidence of Taxpayers 
                  b.  Close the Constitutional Gates to Rent-Seeking 
                  c.   Reform Public Expenditure as Well as Taxation 
                  d.  Institutionalize Savings 
                  e.   Promote Investment 
                       Please explain these recommendations!  
              
             Part II 
             There are many problems of Implementing Taxation in Muslim Countries such as  
                  a.  Economic Structure and Organization 
                  b.  Skewwed Distribution of Income and Wealth 
                  c.   Poor Governance 
                  d.  Lobbying and Corruption 
                  e.  Imbalances in International Trade 
                       Please explain these problems! 
                                                                                      
                                                                                      
                                                                             Good Luck!