Zakat is the only tax an Islamic government can impose
upon its Muslim citizens. It is not merely a charity fund but can be spent on
the collective needs of the people as well: The zakat money can be used to pay
the salaries of all government officials including that of the head of state, to
build all works of public interest, to cater for defence requirements and to
establish an Islamic system of Insurance. In short, the system of zakat
envisaged by the Qur’ān and Sunnah totally meets the requirements of running a
welfare state. Unfortunately, the true concept of zakat has over, the years,
altogether vanished from our religio-political scenario. This dissertation is a
humble attempt to revive this concept and as such a modest contribution towards
the re-establishment of an Islamic Economic Order.
The historian’s pen bears witness that man has continued to
stumble over the issue of the relationship between a state and its subjects ever
since the creation of the first polity at the dawn of civilizational history. In
this regard, the right of a state to levy taxes on its public, in particular,
has created an unending rift between the rulers and the ruled. An institution
which apparently began as a voluntary contribution by the people to relieve a
few individuals of their financial responsibilities and entrust them with the
development and progress of their collectivity gradually became the most
effective means of their own exploitation and persecution.
Taxes were, probably, first imposed in ancient Palestine.
The secession of the ten tribes of Israel as recorded in the Biblical Book of
the Kings was to an important extent a response to punitive taxation. The
ancient empires of Egypt and Babylon obtained revenues from public lands and
extracted levies in kind, in the form of forced labour and personal servitude or
as a share in the produce of private lands. In Athens, at the time of Pericles,
taxes were imposed largely on foreigners and slaves. One who was taxed but
failed to pay was guilty of a capital offense. In Rome, along with custom taxes
and custom duties, there were certain ‘direct’ taxes. The principal of these was
the tributum paid by the citizens and usually levied on as a head tax; later
when additional revenue was required the base of this tax was extended to real
estate holdings. In the reign of the emperor Augustus (27 BC--14 AD) land and
inheritance taxes became a familiar aspect of Roman economic life. Subsequent
emperors raised rates and included more and more objects in taxable items:
wheat, barley, oil, meat, wood, salt, sales, bachelors and even urinals.
As the Western civilization moved into agrarian feudalism,
the principal source of revenue of the governing feudal lord became the rents
paid by his vassals in exchange for Military protection he gave them. The
Normans brought this system to England in 1066. When King John (1167-1216) tried
to enlarge royal power and income with new levies, the feudal nobility rose
against him. In 1215, when the barons imposed the Magna Carta on the king, the
first principle of modern taxation arose: taxes are to be imposed only by the
consent of the governed. It was, however, centuries later before this right came
to be formally established---and that too to no avail.
During the middle ages, kings derived most of their income
from their feudal holdings, and generally needed to levy taxes only to pay for
their extensive wars. Because, ordinarily, such taxes could be collected only
with the consent and aid of the nobles and other large landholders, monarchs
found it necessary to call these landholders into session to approve such
taxation. These sessions of landlords subsequently evolved into parliaments and
other legislative bodies. In 1628, the petition of rights deprived the crown of
Britain to levy taxes without the consent of the parliament. However, this
right, though contributed to a marginal development for the citizens of Britain,
subsequently started a bloody struggle elsewhere: The American Revolution was
triggered by public resentment over the Stamp Act imposed by the British
Parliament in 1765, after the Seven Year’s War. Requiring the colonists to pay
fees to Britain, this act called forth protests against ‘taxation without
representation’ and was subsequently revoked by the British Parliament. However,
tariff duties imposed thereafter on tea and other articles rekindled the
protest. The ensuing Boston Tea Party hastened the advent of the American
Revolution. A similar story may be told about France. Taxation during the years
preceding the French Revolution had become exceedingly heavy with burdensome
levies collected by both the king and the church. The taille, initially a broad
based tax on the value of income from land, had come to be primarily a tax on
the poor farmers, with the nobility, the clergy and the wealthy largely
exempted. A regressive system of customs and excise duties also imposed a heavy
burden falling primarily on the poor. The taxes were used for financing lavish
court expenditures. It is not surprising, therefore, that taxes became a major
dissatisfaction with the old regime that culminated in the French Revolution of
Near the end of the eighteenth century, when the Scottish
economist Adam Smith set forth his famous four canons1 about taxation in his
celebrated treatise “The Wealth of Nations”, mankind thought that it had finally
found the solution to the whole problem. Later Ricardo in his “Principles of
Political Economy and Taxation”, and Mill in his “Principles of Political
Economy” further developed the thought of Smith in an effort to formulate an
ultimate taxation structure acceptable both to the tax imposer and the tax payer
alike. The leading writer in the field around the turn of the century was E.R.A.
Seligman. In his major work “The Shifting and Incidence of Taxation” (1892), and
“Progressive Taxation in Theory and Practice” (1894), he developed the
‘ability-to-pay’ criterion and developed a persuasive theoretical justification
for progressive income taxes. Seligman, however, admitted that the
‘ability-to-pay’ doctrine cannot specify a definite rate of progression as the
ideally just rate. In recent years, Richard Musgrave of the Princeton University
stands out prominently among those who have worked on this problematic issue.
1. “1) One should be taxed according to the ability to
2) The tax should be certain and not arbitrary.
3) The tax should be levied at a time and in a manner most
convenient for the tax payer.
4) The tax should be devised so that costs of collection
(ed. by Edmin Cannon, 5th ed. London 1930, Vol II, Pgs
However, all this intellectual effort, which though
formally bagan with Adam Smith in 1776 and was actually initiated as early as in
1470 by an Italian Diomede Crafa,
has repeatedly failed to settle this conflict between the state and its
citizens. The taxpayer’s revolt in I979 in the USA is a recent example of this
rivalry which continues unabated to this day.
...fourteen hundred years ago Islam had solved this
problem once and for all. While acknowledging the institution of taxation as the
most natural agency to run a state, it took away the right to impose taxes from
man and divinely ordained the statutes of this institution. It laid down in bold
the principles of taxation because they were actually beyond the reach of human
intellect: the above mentioned history of taxation clearly testifys to this
fact. Furthermore, Islam declared zakat, its institution of taxation, an
obligatory act of worship, thereby completely transforming the attitude of the
people towards it. Instead of being considered as a burden it became a
wholeheartedly acknowledged religious obligation!
This brings us to the Islamic concept of zakat. We shall
discuss the principles of this institution set forth by the Qur’ān and Sunnah in
(1) The Nature of Zakat.
(2) The Heads of Zakat.
(3) The Rates of Zakat.
We now take up these in order:
(1) The Nature of Zakat
According to the Qur’ān, zakat has a dual nature: (a)
intrinsic and (b) extrinsic.
(a) The Intrinsic Nature: Viewed thus, zakat is an act of
worship. This is evident from a number of Qur’ānic verses in which it is
mentioned adjacent to salat (prayer), the most important form of worship. The
word ‘zakat’ means both ‘to purify’ and ‘to grow’: paying zakat purifys one’s
wealth and soul, and it actually increases ones wealth in his afterlife. The
Qur’ān stresses both these aspects of zakat:
“[O Prophet!] Take zakat out of their wealth---thou would
cleanse them and purify them thereby.” (9:103)
“That which ye give in riba in order that it many increase
on [other] people’s wealth has no increase with Allah; but that which you give
as zakat, seeking Allah’s countenance, it is these people who will get manifold
[in the Hereafter] of what they gave.” (30:39)
(b) The Extrinsic Nature: Viewed thus, it is the only tax
an Islamic State can impose on its Muslim subjects.
While declaring the requisites of citizenship of an Islamic State, the Qur’ān
“And if they repent [from all un-Islamic beliefs],
establish salat and pay zakat, leave them alone.” (9:5)
The above verse clearly points out that salat and zakat
are part of the public law of an Islamic State, and the only two things which an
Islamic government can positively demand from its Muslim citizens. As far as
zakat is concerned, after a Muslim has paid it to the government, not a single
penny can be further exacted from him.
This is further illustrated by the following two traditions:
“There is no [legal] share [for the society] in the wealth
[of people] except zakat.” (Ibni Maajah: Kitab-uz-Zakat)
“After you have paid the zakat of your wealth you have
paid [all] that was [legally] required of you.” (Ibni Maajah: Kitab-uz-Zakat)
In this regard, the severe warning sounded by the Prophet
(sws) to those who impose taxes other than those ordained by the Almighty must
also be kept in mind:
“No tax-imposer shall enter paradise.” (Abu-Daud:
(2) Heads of Zakat
The following Qur’ānic verse spells out the heads under
which the zakat fund can be expended:
“Zakat is only for the poor and the needy, and for those
who are ‘aamils over it, and for those whose hearts are to be reconciled [to the
truth], and for the emancipation of the slaves and for those who have been
inflicted with losses and for the way of Allah and for the wayfarers.” (9:60)
We take up these heads in order:
1) The Poor and Needy (Fuqaraa and Masaaqeen): The poor
and the needy are the foremost recipients of zakat because they are the primary
responsibility of the state. It must cater for their basic needs like food,
clothing, shelter, health and education. In this regard, the Prophet (sws) is
said to have said:
“It [ie zakat] should be taken from their rich and
returned to their poor.” (Bukhari, Kitab-uz-Zakat)
2) The ‘Aamils over Zakat (‘aamileen-a-’alaihaa): Under
this head, the salaries of all employees of the government including the head of
the state can be paid.
3) Those whose hearts are to be reconciled (Muallafatul
Quloob): Under this head come all forms of political expenditure in the interest
of Islam. There may be many instances, when the affection of certain influential
people must be obtained, particularly in border areas where their role can be
decisive in the safety of a country. During the time of the Prophet (sws) many
tribes were given money under this head to deter them from harming the newly
founded Islamic State.
4) Slaves (riqaab): The institution of slavery was totally
eliminated by Islam fourteen centuries ago. From this particular head money was
given to free slaves. Today, by analogy, this head can be extended to include
other recipients. For example, prisoners of war and other prisoners who are
unable to pay the fine imposed by the courts can be freed by giving money
through this head.
5) Those inflicted with losses (Ghaarimeen): Under this
head, an Islamic system of Insurance can be established and all those who are
inflicted with economic losses can be compensated. Whether rich or poor the real
criterion is that their means of living and its role in the national economy
have been destroyed. People who have acquired a loan and are unable to pay it
back may also be helped from this money so that they may start afresh and the
society can benefit from their abilities.
6) In the Way of Allah (Fee Sabeelillaah): Under this head
defence expenditures of a state can be met and institutions for religious
propagation as well as all works of public interest like roads, bridges,
mosques, hospitals, educational institutions and libraries can be built.
7) The Wayfarer (Ibnussabeel): This implies the welfare of
the wayfarer. Circumstances often make a traveller a needy person, in which
case, his needs can be fulfilled from this head.
(3) Rates of Zakat
Before we mention the rates of zakat, a mention seems
necessary of the items which are exempt from zakat. Nothing except the following
three are exempt:
(i) Means of production: eg. tools, machinery etc.
(ii) Personal items of daily use: eg. personal belongings
like, house, car etc.
(iii) A fixed quantity called nisaab.
However, an Islamic government can give ralaxation on any
item in the interest of the public or because of any constraint in the
collection of zakat on a particular item.
As far as the various rates of zakat are concerned, three
distinct categories can be classified:
1. Wealth: After deducting the nisaab and taking into
consideration other exemptions mentioned above, the wealth of a person, shall be
taxed annually at the rate of 2%. Tax on trade capital shall also be levied at
the same rate by considering this capital to be the sum of cash in hand and cash
2. Produce: Zakat on produce is deducted at the time of
produce and depending upon the various items has three rates: 5%; 10%; 20%
i) 5%: On items which are produced by the interaction of
both labour and capital: eg. produce from irrigated lands and industrial produce
ii) 10%: On items which are produced such that the major
factor in producing them is either labour or capital, but not both. Examples of
the former include an artist’s creation like paintings and the works of scholars
and intellectuals, while examples of the latter include rented houses, and
produce from rainy lands.
iii) 20%: On items which are produced neither as a result
of labour nor capital but are actually a gift of God, eg treasure etc.
3. Animals: Only those animals which are bred and reared
for the purpose of trade and business are subject to zakat. The details of the
rates of zakat on animals can be consulted from any book of fiqh.
This is the concept of zakat envisaged by the Qur’ān and
Sunnah. From the above details it is clear that zakat is the only tax which an
Islamic government can impose on its Muslim subjects
and that it is not merely a fund for the destitute. Moreover, since there is no
basis for necessarily giving it in the possession of an individual (tamleek),
it can be spent on the collective needs of the people as well.
However, after meeting the running expenses of a state,
how the revenue needed for development should be obtained is an important
question, and though it does not directly relate to our topic, yet keeping in
view its profound importance, we end this dissertation while attempting to
answer this question.
Revenue for Development
Before we proceed to answer this question, it is important
to appreciate that Islam drastically reduces a major part of non-development
expenditures of modern day states through a mandatory requirement for those in
authority namely: their standard of living must be equal to that of a common
man. Furthermore, Islam strictly enjoins the government to plan its expenditure
according to its income. It totally forbids an economy which is based on debt,
ie, planning a state’s expenditure beyond its income and covering the deficit
through other means. However, in emergency situations, the state has a right to
appeal to its public for money. Of course, this appeal will only have an effect
if the government has established its credibility, and history bears witness
that whenever a state whose rulers and administrators lived like commoners and
administrated justice appealed for wealth in times of need people presented them
with all the wealth they could spare.
In our opinion, the above stated regulation about those in
authority, the total elimination of interest in the economy and the imposition
of the true concept of zakat will not only generate enough money to meet the
running expenses of the state but a considerable amount for development as well.
However, a major part of the revenue for development would be obtained by means
of all state owned enterprises whose management would be transfered to the
private sector through either or both of the following two modes:
(i) selling a certain quantity of shares to the private sector, (ii) imposing
kharaaj (tribute) on the party of the private sector which is entrusted with the
job of management.