Zakat- meaning, principles,basis, categories,inflation,advantages and influence
(a) Its Meaning for Modern Man
The word “Zakät” means “that which purifies” and “that which fosters”. All original sources of wealth—the sun, the moon, the stars, the earth, the clouds that bring rain, the winds that drive the clouds and carry the pollen, all phenomena of Nature—are the gifts of God to the whole of mankind. Wealth is produced by the application of man’s skill and labour to the resources which God has provided for man’s subsistence comfort and over part of which man enjoys proprietary rights, to extent recognized by Islam. In the wealth that is produced, therefore,
three parties are entitled to share: the workman, whether skilled or unskilled; the person who supplies the capital; and the community representing mankind. The community’s share in produced wealth called the Zakät. After this has been set aside for the benefit community, the rest is ‘purified’ and may be divided between remaining parties that are entitled to share in it.’
Zakät is the pivot and hub of Islamic public finance. It covers moral, social and economic spheres. In the moral sphere Zakät away the greed and acquisitiveness of the rich. In the social sphere acts as a unique measure vouchsafed by Islam to abolish poverty from society by making the rich alive to the social responsibilities they have the economic sphere Zakät prevents the morbid accumulation of wealth in a few hands and allows it to be diffused before it assumes threatening proportions in the hands of its possessors. It is a compulsory contribute
of the Muslims to the state exchequer.
The term “Zakät” has no malevolent connotations as all other secular taxes of today have. In at least twenty different places in the Holy Quran there is an association of Zakät with Salät (prayers). Thus the Quran categorically states that whoever wants to enter the brotherhood of Islam shall have to establish regular prayers and pay Zakät regularly. Both the practices are equally fundamental in importance. Zakät is barren if it does
not spring from a prayerful mood when there is no trace or taint of selfishness; Salät (prayer) is fruitless if it does not bring about a mood and temper of voluntary submission to the demands and dictates of genuine social welfare. This dynamic interplay of these two spiritual and temporal institutions in Islamic society is symbolic of the inner unity of religion and economics. As the moral fervour behind the Zakät institution is derived from the perennial spiritual source of Salät, its social and economic effects are wholesome and the social pattern that emerges is free from the hideous tyrannies of capitalism and the coercive standardization communist society. It was this all-pervading social harmony that led H. G. Wells, in The Outline of History, to remark: “Islam has created a society more free from widespread cruelty and social oppression than any society had ever been in the world before.
In fact, equal stress on Zakät and Salät signifies true progress in Islamic society. Dr R. R. Marett rightly observed, “Real progress is progress in charity, all other advances being secondary thereto.” Aldous Huxley writes in the same vein: “Such is the world in which we find ourselves—a world which, judged by the only acceptable criterion of progress, is manifestly in regression. Technological advance is rapid. But without progress in charity, technological advance is useless. Indeed, it is worse than useless. Technological progress has merely provided us with more efficient means for going back on words. ” The importance of Zakät can, therefore, hardly be overestimated.
Six Principles of the shariah governing Zakat
If one carefully observes the rules and regulations governing Zakät one may easily find out six principles of the Shari’ah governing Zakät. They are:
(a) the principle of faith,
(b) the principle of equity,
(c) the principle of productivity or maturity,
(d) the principle of reason,
(e) the principle of convenience and
(f) the principle of freedom.
The first principle governing Zakät is the principle of faith in Islam, because the payment of Zakät is an act of worship and as such only a true believer can perform it in its real sense and spirit. In several verses of the
Holy Qurün Allah enjoins Salät (prayer) and Zakät on those who believe in Islam for their spiritual and secular advancement. For instance, the Quran says:
“And establish regular Prayer
And give regular Charity;
And loan to God
A beautiful Loan.’
–(Sürah LXXIII. 20)
Once Hadrat Abü Bakr in a public address on the obligatoriness of Zakät and its inseparableness from Salät went so far as to say: “By God, I will wage war against those who discriminate between Salät and Zakät.”
The second principle of equity governing Zakät is contained in the saying of the Prophet (peace be upon him): “In (the product of) land, watered by rain and springs or in what is watered by water running on the
surface of the ground is one-tenth, and (in) what is watered by wells one-twentieth” (Bukhäri) Zakät is one generic term applicable to all ordinary compulsory contributions and the share of the state in various kinds of
income such as treasure-trove, booty obtained in religious warfare, land produce, etc., follow the principle of equity which states that the lesser the amount of labour and capital, the lesser the rate of the levy.
The third principle is the principle of productivity or maturity. Thus Ibn ‘Umar said: The Messenger of Allah (peace be upon him) reported, Whoever acquires wealth, there is Zakät on it until a year has passed
over it” (Tirmidhi and Mishkät). Thus Zakät is paid annually after calculating Nisäb. Nisäb means annual minimum surplus of the value of 40 riyäls or the property equivalent in value to it over necessary expenditure. Nisäb becomes subject to Zakät only when it is mature and productive. But the Nisäb will be dissolved on the date of the sale during a year and the first year must elapse before the amount realized becomes subject to Zakät. The lapse of a period of twelve months is essential because time is indispensable for productivity to materialize. Obviously, Zakät is not charged on things which are perishable and are meant for personal use and consumption (i.e. residential houses, clothes, etc.). It may be noted that the Nisäb is different with different kinds of property and is also reckoned differently. For instance, in the case of $awä’im (animals) Zakät attaches importance to their physical identity and not to their commercial value as in the case of merchandise. In the case of gold and silver, Zakät is determined in terms of weight. But whether the property is apparent or non-apparent, Zakät will not be charged if the Nisäb is destroyed accidentally after the lapse of the year but before the Zakät is actually paid.
Zakät lapses on death and apostasy. If the death of the property-owner occurred during a year, a year must pass before Zakät is charged on the property.
The fourth principle is the principle of reason. That is, the person who is to pay Zakät must be a man of reason and responsibility. Hence the view that minors and the insane are exempt from Zakät, which is regarded as an act of worship and, therefore, incumbent only on those who are capable of exercising discretion. But, according to the Mälikites (especially in the case of cattle and crops) and also according to al-Shäfl’i, minors and the insane are subject to Zakät. The basis of their contention is that Zakät is a tax on property. Hence it is realizable, though the property may belong to minors or the insane. In the writer’s opinion, minors and the insane may be subject to Zakät only when their properties are under the care of such guardians as are expected to utilize their
property in the most reasonable way. Where there is a possibility of losing the minor’s property through lack of care, it should not be subject to Zakät. The Tradition is clear about it. The Prophet (peace be upon him) is reported to have said: “Beware! whoever is the guardian of an orphan who has property, should trade with it and should not have it (undeveloped), so that the Zakät should consume it” (Tirmidhi).
The fifth principle of convenience of Zakät is derived partly from the nature of collection of Zakät and partly from the Islamic code of economic ethics. As regards collection of Zakät there is nothing more convenient than what is paid at the end of a year. Besides this, the converted Muslims who are in a non-Muslim state are not held
responsible for the payment of Zakät. It is not unlikely that a man who gives up his own religion and embraces Islam should suddenly find himself deprived of all means of livelihood. This change may wreck his business and may even ruin his civic life. Thus he is free from the payment of Zakät, rather his maintenance is a justifiable charge on the Zakät fund.
The last principle of Zakät is the principle of freedom. That is, one must be a free man before one is eligible for payment of Zakät. Therefore, a slave.or a captive is not required to pay Zakät as he is not supposed to own any property. In fact, a slave is entitled to some pecuniary help from Zakät money which he might use to secure emancipation. Nowadays when slavery is extinct, persons who undergo imprisonment may be placed in the category of those who are not considered to be free men and their innocent dependents may get Zakät revenue.
All these principles governing payment of Zakät should be reflected not only in its traditional basis of assessment but also in the modern basis of the assessment of Zakät.
The doctors of conventional law generally divided property on which Zakät was to be applicable into four categories.
The first category was gold and silver and the profits of trade. Here the Zakät levied was 2.5 per cent. The taxable limit is the possession by an individual, for a continuous period of one year, of 52.5 total of silver or
total of gold. As a matter of fact, after deducting Nisäb and debt, all idle wealth is taxed at the rate of 2.5 per cent.
The second category of property was cattle and other domestic animals. The percentage of Zakät was approximately the same as in the case of the first category.
The third category was agricultural and farming produce and the proportion of Zakät was assessed at one-tenth in regard to land irrigated by natural means (e.g. rain) without any extra effort by the owner, and one-twentieth in the case of land irrigated by artificial means and requiring extra effort on the part of the owner.
The fourth category was mines and treasure-trove. If a mine or a treasure-trove is in the land of a Muslim, one-fifth of it, irrespective of whether it is owned by individuals or by the state, should form Zakät revenue to be spent exclusively on the items mentioned in the Qur’an.
It must be noted here that property which is subjected to Zakät must be that which is in excess of the basic needs of the owner and of what is required for his bare livelihood. Let us now discuss in some detail the
modern basis of assessment of Zakät revenue.
The modern controversy in regard to Zakät is on the meaning of the term “property” referred to in the verses of the Qur ‘an. The Qur’an says: “Take alms out of their property—thou wouldst cleanse them and purify them
thereby— and pray for them. Surely the prayer is a relief to them. And God is Hearing, Knowing” Sürah IX 103.
“The parable of those who spend their property in the way of God is as the parable of a grain growing seven years, in every year a hundred grains.And God multiples further for whom He pleases. And God is Giving,
Knowing” (Sürah 11. 261).
The categories of property defined in the early days of Islam on which Zakät is to be applicable should not, in the writer’s opinion, be rigidly maintained. The modern basis of assessment of Zakät has been carefully
studied by a group of eminent Islamic jurists.
The Arab League held a seminar on this subject, and a comprehensive report on social solidarity in the Arab world was presented to a meeting held in Damascus in December 1962. The report was prepared by Shaikh
Muhammad Abü Zahrah, Shaikh ‘Abd al-Wahhäb Khalläf of the Faculty of the Shari’ah at the University of Cairo, and Shaikh ‘Abd al-Rabmän Hasan of al-Azhar University.
In this report, to which frequent reference will be made, the view is held that Zakät would now be due on all kinds of property not known in the early days of Islam. Such things as industrial machinery, bank notes, profits of professions and trades would now be subject to Zakät.
(b) Zakät on Industrial Machinery, etc.
On this subject, the report says: “The application of this distinction in our time leads us inevitably to add to the category of property liable to Zakät property which is now considered productive and which was not known
to be productive at the time when the jurists originally formulated their theories on the subject. Where property is a means of exploitation for its owner, or where the owner of a big factory employs labour to run it and utilises industrial machinery as the means of bringing about profit, the property would be considered productive for the purpose of Zakät and a charge made upon it. Here the gain which the owner of the factory secures comes from the industrial machinery he uses, and this machinery is not in the same category as the tools of the blacksmith or the carpenter who alone uses the tools and without whom there would be no production from the tools. For this reason Zakät should be levied on this kind of industrial property on the ground that it is productive property and not in the category of property needed for the basic requirements of the person owning the property. The jurists of old order did not impose Zakät upon industrial implements because these implements were of a primitive nature and were not of themselves productive, as is the case at present.
Production from industrial implements can be possible only through their use by the worker. Now, however, machines produce more or less by themselves, and can be considered in the category of productive goods for
the purposes of Zakät. Modern factories consider their industrial machinery as their growing asset. But it must be pointed out here that tools owned by a craftsman and used solely by him, such as the tools of a
hairdresser who works alone, should be exempt from Zakät because they would be the basic and essential requirements for the craftsman without which he cannot produce anything. And it cannot be said here that this
view is contrary to the views of the old jurists, for the simple reason that the old jurists did not know of this problem and could not have made any reasonable pronouncement in regard to it. We are merely applying the
basic theories which the old jurists have devised on the subject.”
The report discussed the rate of the Zakät to be levied on industrial machinery and similar property, and came to the conclusion that it would be ten per cent of its net produce, by analogy to the Zakät levied on the produce of agricultural property.So far as the imposition of Zakät on industrial machinery and factory produce is concerned, ‘I agree entirely with the views expressed in the report, but with regard to the rate of Zakät on industrial machinery, etc., I cannot agree with it on the following grounds. Firstly, the analogy of agricultural produce is not altogether apt, because the rate of depreciation is greater in the case of industrial machinery than in that of
agricultural land. The rate of Zakät must thus be assessed after making due allowances for depreciation. Obviously, the rate of Zakät will in this case be lower than that on agricultural produce. Secondly, here the
question of the rate of Zakät is linked with productivity which varies from industry to industry. It is, therefore, felt that the rate of Zakät on industrial machinery and factory produce should be made flexible so that the element of progressivity may be introduced.
The report also dealt with the question of Zakät in regard to bank-notes and other forms of currency and bills of exchange, such as stocks, shares and bonds. These, of course, were not known in the early days of Islam.
The report says: “Stocks, shares and bonds, if acquired for the purpose of trade and gain, are dealt with as commodities liable to the payment of Zakät. For thiS purpose the value of the stocks, shares and bonds is taken
at the beginning of the year, and Zakät charged on the profit or gain secured. The jurists of old would agree with this. And where the stocks, shares and bonds a-re acquired for investment, Zakät would be payable on the profit or dividend obtained from the investment.”
This view is subject to criticism on the ground that it has combined stocks and shares, on the one hand, and bonds, on the other, and devised the same rules to apply to all three. Stocks and shares give a dividend
which varies from year to year, and this is a permissible profit according to the Shari’ah, while bonds may be contrary to the Shari’ah and more like usury and illicit profit.
(d) Zakät on Rent, Profits, etc.
On the question of the rate of Zakät on rent derived from houses and other accommodation, the report says: “The majority of the jurists are known not to have agreed that Zakät is chargeable on houses. The reason
is that houses at the time were not exploited for commercial purposes but were used primarily by the owner, and were thus essential and basic needs.
Things are different now, and houses and other property are built for the purpose of investment and for letting to others and the return on houses is now higher than the return that can be expected upon land. With the
changed situation, the public interest requires that Zakät should be charged on houses in the same way as it was, in the past, charged on land.
There is no difference in reality between the owner of land who lets it out to others to farm and then collects a return on it, and the owner of houses who lets them and collects a return. It would be utterly unreasonable to
charge tax on land but not on houses in such a case, and this would also be in injustice to the owners of agricultural land. Another result of this would be that people would give up ownership of buildings. The Shariah
cannot be said to make such an illogical rule. The difference between us and the jurists of old is not a difference as regards theories-but as regards the application of the theories. In their days buildings were not exploited
for profit, as they are now.”
Though the learned jurists are inclined to recommend that the rate of Zakät on bank-notes as well as rents, etc., should be per cent, yet I am for flexibility in determining the rate of Zakät. That is, in such cases the
rate of Zakät should be fixed but tempered by considerations of productivity and profitability.
Now I would draw Zakät and the attention of the jurists to the modern problem of inflation and its impact on the rate of Zakät.What is inflation? By inflation we mean a rise in the general level of prices usually on account of an increase in the supply of money, unaccompanied by a corresponding increase in demand. thus, according to Professor Pigou, “Inflation exists when money income is expanding more than in proportion to income-earning activity,” resulting in a rise in prices. When prices rise due to increased gold supply, we speak of gold inflation, when due to currency notes, currency inflation, and when it is due to an over expansion of credit„ the term credit inflation is used, Mere inflation implies a general rise in prices due to some, any, or all of these causes.
Deflation is the opposite of inflation. It should be noted that high or low prices as such are immaterial. If all prices including prices of services double or halve overnight, it makes no material change in the economic
position of the people concerned. But this never happens. Actually, rising or falling prices influence the course of production and the distribution of wealth in different and often adverse ways.
In the modern Muslim world, almost everywhere we find the problem of rising price levels as a part of a rise in the price levels throughout the world. Without going into the details of its causes, it can be said that the
purchasing power of Zakät revenue diminishes during periods of rising prices; the poor who are entitled to receive the Zakät money are thus hard hit. Therefore, there is no reason to believe that the items taxed and rates
charged were meant to be unchangeable with changing circumstances, as the door of Ijtihäd is never closed in Islam. One school of thought held the view that the rate of Zakät cannot be changed as it has been fixed by the
Apostle of Allah himself. But if we look to the spirit of Zakät, there is not the least difficulty in concluding that in fixing the rate of Zakät the Islamic state may introduce the element of elasticity to face the inflationary
tendencies of the economy of almost all the Muslim countries of the world. By change in the rate of Zakät, I mean change in its rate in money terms, not in real terms. Let us suppose that twenty years ago one could
purchase ten seers of rice with 2.5 riyäls. Now if one can purchase five seers of rice with the same amount, then what does it mean? This means depreciation in the value of money to the extent of 50 per Cent, which
justifies an increase in the rate of Zakät to the extent of 50 per cent. If this is not allowed, the objectives for which Zakät is collected will be defeated.
Money itself is not valuable; it is valuable for it has an exchange value. Therefore, if the exchange value of the existing rate of Zakät is reduced to zero, Zakät will lose its significance in bringing an element of socialism in
to society.
In fact, Hadrat ‘Umar himself introduced many changes in the system of Zakät. He imposed Zakät on horses, whereas before him horses were exempt from Zakät. He helped the non-Muslim aged and the sick and the
unemployed out of the proceeds of Zakät. Therefore, it is not the manner or the rate of collection that matters. Zakät is not an end in itself; it is a means to an end.
(f) Zakät and Principles of Public Finance
Let us now discuss some aspects of Zakät in the light of the principles of modern public finance. Firstly, an attempt may be made to distinguish between Zakät and modern sources of public finance, although the
religio-economic character of Zakät makes it a diffcult task to compare it with the modern materialist sources of public finance, which consist of taxes, fees, prices, special assessments, rates, etc. Though compulsion is
the essence of both tax and Zakät, yet Zakät differs fundamentally from tax on the grounds that tax (i.e. income-tax) is generally imposed on income while Zakät is comprehensive in the sense that it is charged not
only on savings but also on property.
Again, Zakät is neither a fee nor a price. Fees are a compulsory payment but are paid only by those who obtain definite services in return. In the case of Zakät the question of “definite return” does not arise. Moreover, the main difference between Zakät and prices lies in the fact that one can escape prices by not purchasing a service since price is the payment for a service of a business character, e.g. charges for travelling on railways, whilst Zakät is an obligatory tax.
Finally, Zakät is not a special assessment, neither is it rates, Special assessment, as defined by Professor Seligman, is “a compulsory contri-bution levied in proportion to the special benefit derived, to defray the
cost of a specific improvement to property undertaken in the public interest,” The “benefit theory of taxation” which is the basis of special assessment is not the main consideration of Zakät. Moreover, Zakät
differs from rates partly because rates are levied on immovable property and partly because rates generally vary from locality to locality. Zakät, which is guided by one uniform principle, is not leviable on instruments
and residential houses.
(g) Zakät and Canons of Taxation
Though there is a fundamental difference between Zakät and the modern sources of public finance, yet Zakät can be linked to Adam Smith’s four canons of taxation— Equality, Certainty, Convenience and Economy.
Firstly, according to the canon of equality, “the subjects of every State ought to contribute towards the support of the Government, as nearly as possible in proportion to their respective abilities, that is, in proportion to
the revenue which they respectively enjoy under the protection of the State.” By ability is meant equality of sacrifice and not of amount paid.
Every person should contribute towards the maintenance of the state according to his ability. Thus the rich should pay more taxes than the poor. This is true under the modern system of taxation under which the
tax is on the income of an individual. Zakät, on the other hand, is levied on the accumulated savings at a uniform rate which ensures equal sacrifice. Moreover, Zakät cannot be spent by the state in any way it likes.
It is an express objective of Zakät that it should be made available for the poor and be something from which the rich can have little or no direct benefit.
Secondly, according to the canon of certainty, “the tax which each individual is bound to pay ought to be certain and not arbitrary. The time of payment, the quantity to be paid, ought all to be clear and plain to the contributor and to every other person. ” The tax-payer should know what amount he is to pay so that he may adjust his expenditure to his income. The tax-payer should also know when he is to pay and why he is to pay. As regards the certainty of Zakät there can be no comparison, because its basic rules are unalterably fixed by Divine Sanction. Like any other tax, the ordinary principles of assessment would enable the state to ascertain
the amount of revenue to be derived from Zakät.
Thirdly, the canon of convenience states that “every tax ought to be so contrived as both to take out and to keep out of the pockets of people as little as possible over and above what it brings into the public treasury of
the State.” As for the collection of Zakät, the rules are so simple that no specialized knowledge is required and consequently the cost is definitely economic. Similarly, in at least twenty places in the Qur’an, Zakät is
associated with Salät. It is this importance which enrobes Zakät with a religious sanctity of the highest order and thus makes the realization of this tax easy, inexpensive and voluntary.
It should be noted here that economists have recently added two more canons—the canon of productivity and the canon of elasticity. It goes without saying that Zakät is quite consistent with the canon of productivity since the taxing of idle money in the form of Zakät inevitably leads to its perforce employment in productive channels, which in turn increase the national wealth of a country. True it is that Zakät does not appear to be elastic in the modern sense of the term. But the question of elasticity loses its force as, under the Islamic scheme of society, it is open to the head of the state to devise and impose new taxes according to changing circumstances.
In no country does each tax satisfy each of these canons. Even all modern taxes are bound to infringe some canons in one way or the other. Zakät as a system of taxation satisfies, not only most of the principles of
taxation, but also possesses certain definite advantages over modern taxes.
In comparison with modern taxes, Zakät possesses definite advantages over them in at least three respects. In the first place tax evasion is a serious problem for modern tax collection. It is quite well known to everybody that many people try to evade paying income-tax by presenting false accounts. The question of dishonest practices in the case of Zakät is quite unexpected because of Zakät’s religio-economic character.
Needless to say that Zakät is one of the five pillars of the Islamic faith. In the economic sphere it is a voluntary submission to God’s will. Secondly, the main source of Zakät being unused hoarded wealth, it serves a noble purpose. It is only through Zakät that it is possible to unearth hoarded wealth and utilize it for the greater benefit of society. As Zakät is a divine order, wholehearted co-operation of the individual concerned to bring out his hoarded wealth would be forthcoming. Under a modern taxation system this co-operation will not be easily forthcoming as nobody will willingly give out to the state the secrets of his hidden treasures. Actually, Zakät checks the tendency to hoard money and provides a powerful stimulus to investment in productive purposes, since Islam allows praofit and partnership.
Finally, the purpose of Zakät and the heads of its expenditure have been well defined in the Holy Quün. So the government is not permitted to spend the money collected through Zakät in any way it likes. But the
revenue collected from taxes can be spent whimsically by the modern state. Empirically viewed, income from taxes is not always spent on productive purposes. Moreover, Zakät is not “felt” as much as income
tax, the payment of Zakät being a divine order the people will pay it willingly.
Social Security. Nowadays, in almost all advanced countries, there is a call for social security schemes. Regarding the meaning and scope of security, Professor F. Benham in his book, Economics, observes: “It is the
duty of the State to provide a minimum economic security for all its citizens. The phrase commonly used for this minimum of economic security is social security. There is no clear-cut line, established by general usage, between social security measures and other measures which reduce inequality, such as free hospital treatment, medical advice and medicine; free education; and subsidies on food-stuffs and on working class houses. The general practice is perhaps to include under social security measures only schemes for providing money benefit to persons suffering economic hardship. Such schemes include insurance against unemployment and sickness; compensation to workers who have met with accidents in course of their employment; maternity benefits; family allowances for children; pensions to old people, widows, the blind, and those injured in war; and in the last resort national assistance.”
However, if we examine the heads of expenditure of Zakät, there is hardly any difficulty in concluding that there is nothing original in modern social security schemes.
(i) Social Advantages of Zakät
According to modern economists, whether a particular tax system is good or bad depends on its effects on society. That tax system is best which secures maximum social advantage—a system in which the economic
welfare of a community can be increased. In his book Principles of Public Finance, Dr Dalton observed: “The two chief conditions of an increase in the economic welfare of a community are, first, improvements in production and, second, improvements in the distribution of what is produced.
Improvements in production resolve themselves into (1) increase of productive power so that a large product per worker shall be obtained with a smaller effort, (2) improvements in the organisation of production so as to reduce to a minimum the waste of economic resources through unemployment and other causes, and (3) improvements in the composition or pattern of production so as to serve the needs of the community.
“Improvements in distribution resolve themselves into (1) a reduction in the great inequality which is found in most civilised communities in the incomes of different individuals and families, and (2) a reduction in great
fluctuations between different periods of time in the incomes of particular individuals and families, especially among the poorer sections of the community.’
Zakät improves the consumption, production and distribution pattern of an Islamic society. One of the greatest evils of capitalism is that the productive resources are controlled and owned by a few fortunate people to the utter neglect of a vast majority. This results in a serious disparity and inequality of income which in its ultimate analysis retards the growth of industries and commerce in the country. Because a monopoly dominated economic order always stands in the way of the full utilization of the economic resources of a country.
But Zakät is an uncompromising enemy of hoarding and a killer of capitalism. As Zakät is an obligatory tax on rich Muslims, the object of it is to remove the inequality of income and to return purchasing power to the
poor people. According to the teachings of the Holy Quran, there is no harm in earning money but it is the sacred duty of the Islamic state to see that not a single citizen in the state is deprived of the bare necessities of life.
This object can easily be achieved by proper distribution of Zakät money among the poor and the needy. Zakät, by giving them purchasing power, brings about a balance between demand for and supply of goods
and thus facilitates the course of production in the country and smooths the path of national progress and prosperity. Now these people, having purchasing power in their hands, will demand more goods; entrepreneurs
will try to produce more; the scope of employment in the country will increase, and with that the national income will also go up. Zakät thus benefits both the rich and the poor—those who pay it and those who receive it as the Qur’an says: “It (Zakät) brings well being to both the person who pays it and the person who receives it.’
Thus it may be repeated that Zakät is not an end in itself; it is a means to an end. So the essence of Zakät lies not in its detailed rules, but in the purposes and objects for which it was designed. But we must be aware
that the greater the hold of Islam on the people, the greater the chance of smooth collection and distribution and the less chance of evasion. So sincere attempts must be made by the Muslim states to inculcate the spirit
of Islam among Muslim members of the community.
(j) Zakät and Modern Muslim States
We have already seen that the institution of Zakät contains enormous potential for mitigating the sufferings of degraded humanity. The modern Muslim states must mobilize their domestic resources through Zakät for
financing various development programmes in the education, health, labour and social welfare sectors. Therefore, attempts should be made not only to collect Zakät revenue by the state but also to examine thoroughly the institution of Zakät. To start with, they can set up “People’s Zakät Welfare Trusts” to be administered by eminent jurists of Islamic Law and administrators of great integrity of character under the overall supervision -of the states concerned. It should be examined whether it is possible to introduce an element of flexibility in fixing the rate of Zakät keeping in view the inflationary pressure on the developing economy as well as the peoples’ sentiments about it. In the first phase of implementation of a Zakät scheme, its rate, as fixed by the Prophet, may not be disturbed. Without losing further time, an environment will have to be created where it is possible to introduce the scheme of Zakät Saving Certificates” somewhat on the lines of the National Investment Trust (N. I. T.) Units of Pakistan. The proposed “Trust” may invest these saving certificates like N.I.T. of Pakistan. The dividend may be declared minus the amount of Zakät which must be known to the persons concerned so that they can recommend the names of the “entitled” persons. The persons who will
purchase these certificates may be given relief against income-tax, which will, I am sure, be sufficient incentive on the financial side. But the freedom to realize such non-transferable certificates after the prescribed
maturity period must be ensured. The superiority of such a scheme lies in the fact that, unlike modern schemes, the person concerned will be gaining both tangible and intangible advantages—tangible advantages in the form of profits from the investments, and intangible advantages in the from the act of performing a supreme religious obligation. This is just a broad outline of the scheme; what is needed is a mass of detailed provisions, fresh thinking and planning.
Tax structure in early Islam does not fall into the two classes of religious and secular revenue, as wrongly maintained by many Western scholars.
In spite of the simplicity of the system, there were a number of taxes prevalent in the early Islamic State. Generally speaking, they are: (a) Zakät, (b) Jizyah, (c) Kharäj or Land-Tax, (d) Spoils of War, (e) Tax on
Mines and Treasure Trove, (f) Customs Duties and Tolls. It is found by analysis that the tax system of early Islam was elastic and dynamic in nature.
The author feels profoundly that the institution of Zakät even today contains enormous potential for communal betterment which we should utilize in a systematic manner through government agency, for financing
the social welfare and social security schemes of the modern state such as poor-houses, centres for free medical treatment, schools to provide elementary, secondary and technical education or the indigent, money
relief for the unemployed, aged, widows and orphans, and a beginning might be made with the grant of relief to the innocent dependants of persons who are suffering imprisonment for crimes, etc.
The author, however, feels that the categories of property defined in the early days of Islam to which Zakät is to be applicable should not be rigidly maintained It is to be decided whether or not such things as industrial machinery,-bank-notes, shares, stocks, etc., should be subject to Zakät.The author also feels that in fixing the rate of Zakät, the Islamic state may introduce an element of elasticity to face the inflationary tendencies
of the economy of almost all the Muslim countries of the world. During the periods of rising prices, the purchasing power of Zakät revenue diminishes; the poor who are entitled to it are thus hard hit in real terms.
Hadrat Umar introduced many changes in the system of Zakät, because it is a means to an end, not an end in itself.
Note:
1. N. P. Aghnides, p. 319.
2. H. G. Wells, The Outline of History, p. 325
3. S. A. Siddiqi, Public Finance in Islam
Abdullah, S. M. “Zakat and Poverty Comment” in Voice of Islam, Vol.24, no. 4, Karachi, 1974.
Ahmed, Ziauddin, “Ushr and ‘Ushr Lands” in Islamic Studies, vol. XIX,no. 2. Islamabad, 1980.
Faridi, F. R. “Zakat and Fiscal Policy”, in Studies in Islamic Economics,ed. by Khurshid Ahmed, Islamic Foundation, London, 1980.
Government of Pakistan, “Zakat and Ushr Ordinance, 1980” Ordinance No. XVIII of 1980, in Zakat and Usahr by Muhammad maul Haq
Ministry of Information and Broadcasting, Islamabad, 1980.
Contributor: Muhammad Abdul Mannan,
M.A (Bangladesh), M.A. (Econ.) Mich. Ph.D.(Michigan),
Professor, Islamic Research and Training Institute,
Islamic Development Bank, Jeddah.