ISLAMIC ECONOMIC SYSTEM
Can an Islamic State Levy Modern Taxes?
Public finance deals with the income and expenditure of a state. It consists of the efficient management of taxes and other sources of revenue, proper budgeting and effective control over state expenditures. In this chapter, we would study in detail the sources of revenue, while in the next chapter we would discuss budget and expenditure of the Islamic state.
Sources of revenue of the public treasury (Bait-ul-Mal) in the Islamic state in the time of Prophet Muhammad (PBUH) and early caliphs included Zakat, Ushr, Khums, Fai, Jizyah ...view middle of the document...
(2:43). At another place, the Qur’an enjoins upon the prophet of Islam to collect Zakat in these words: “take alms of their wealth, wherewith thou mayst purify them and mayst make them grow and pray for them. Lo! Thy prayer is an assuagement for them. Allah is Hearer, Knower” (9:103). The Prophet of Islam has been quoted by Mishkat-ul-Masabih on the authority of Ibn Umar as follows: “Islam is built on five things; to bear witness that there is no God but Allah and that Muhammad (PBUH) is His Messenger; to establish prayer; to pay Zakat; to make pilgrimage; and to keep fast in Ramadan”.
Zakat is not only a tax but also an act of worship. It is one of the five fundamental articles of faith for a Muslim. It is the corner-stone of the financial structure of the Islamic State. Next to Salat (prayer), Zakat is the most important of the religious obligations enjoined on the followers of Islam. The importance of Zakat in Islam can be judged from this very fact that the Qur’an mentions Zakat for more than eighty times, while for twenty seven times commandments regarding Zakat are found in close connection with obligatory prayers. Hadrat Muhammad (PBUH), the Prophet of Islam, not only established a model system of collection and disbursement of Zakat but also made rules and regulations of this levy. Zakat is not a private charge but it is a State institution as referred to in the verses 60 and 103 of chapter 9 and verse no 41 of chapter 22 of the Holy Qur’an. Practice of the Prophet also establishes that system of Zakat was set up in the Islamic State as governmental institution. After the demise of the Prophet of Islam, when some people declined to pay Zakat, Hadrat Abu Bakar, the successor of the Prophet, declared war on them to enforce Zakat as a state levy.
Briefly speaking, following rules and regulations govern the system of Zakat:
1. According to jurists and scholars, Zakat is imposed on the wealth of a person who is (a) Muslim (b) adult (c) sane (d) free and (e) solvent. However, Zakat is payable on the wealth of a minor as well as on the wealth of an insane person and that is paid by the guardian. As it is a religious duty, it is obligatory on a Muslims only and no non-Muslim is obliged to pay it. A slave and insolvent debtor is also not liable to its payment.
2. Nisab of Zakat or the minimum limit of wealth which attracts liability of Zakat has also been fixed at various levels in case of different categories of wealth. Nisab in case of gold is 20 Misqal or 7.5 tolas or 3 ounces. In case of silver, it is 200 Dirhams or 52.5 tolas or 21 ounces. In case of camels, it is 5 in numbers. In case of cows, it is 30 and in case of goats and sheep, it is 40 in numbers. Articles of trade and general merchandise qualify for Zakat when their value is equal to Nisab of silver.
3. Rate of Zakat in case of gold and silver is 2.5%, in case of cattle wealth it varies between 1% to 2.5%, while in case of articles of trade it has been fixed at 2.5%....