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Qur’an says:
• Practise regular charity…………. (2: 43)
• They ask you how much they are to spend; Say: “What is beyond your needs.”(2: 219)
• What God has bestowed on His Messenger (and taken away) from the people of the townships, belongs to God,- to His Messenger and to kindred and orphans, the needy and the wayfarer; In order that it may not (merely) make a circuit between the wealthy among you. So take what the Messenger assigns to you, and deny yourselves that which he withholds from you. And fear Allah. For Allah is strict in Punishment. (59: 7)
Charity is an act of utmost importance in all religions of the world. Christianity, Hinduism, Buddhism, Jainism, Judaism and Zoroastrianism promote charity in a big way. In Islam, it however assumes a much more methodical and organised shape.
1. Charity is one of the pillars of Islam and is a fundamental duty on every Muslim who has wealth beyond a specified value. Zakah literally means purifier. Muslims have been told that it purifies not only their wealth, but their soul as well. Those paying their dues guidelines provided by the government, failing which, law will take its course of action.
2. Unlike other religions, Islam is also a socio-political system, which provides clear guidelines for the state. The regime of charity in Islam, if formally applied to the tax structure of a country, will result in a much better mode of generation of revenue and promotion of economic parity. It will suffice here to say that Islam envisages a tax structure based primarily on Assets and Production taxes in contra-distinction with the currently popular one dominated by income and consumption Taxes.
3. Charity is not just Zakah. Ushr (one tenth on the produce) and Khhums (one fifth on the spoils and other naturally received booties) are two other forms of obligatory charity that are hardly emphasised these days by the Ulema.
The system of Zakah is not important just because it makes the rich pay some part of their wealth to the poor, but also for another important reason. If we properly understand the meaning of Zakah, it implies a form of Assets Tax. Normally, in modern economic systems, it is income, not assets, that is taxable. Income tax serves only the interests of the big business, and has devastating effects on the economic interests of the rest of the nation. Industrialists prefer income tax to the other taxes due to several reasons.
Firstly income tax envisages a tax only on the preceding year’s income and has nothing to do with the cumulative assets, which keep on growing. It can be easily noticed that the value of assets possessed by the affluent is always much greater than their annual income. Thus, income tax is the minimum possible amount they have to submit.
Secondly, unlike expenditure-tax, it has no depressing effect on purchasing tendencies of the people; annual turnovers of companies are therefore not affected.
Thirdly, it is easy to evade income tax through subtle manipulations of rules, purchase of assets that are purchased either surreptitiously or are shown to have been purchased at much lower prices than the actual, display into accounts of much greater expenses than actually incurred, and bribing tax-collectors.
The damaging effects of income tax are multiple. Black money sustains its upward march; prices keep on soaring; land, houses and other immovable properties become costlier. Thus inflation helps industrialists in strengthening their hold over the economy; for the value of assets amassed by them continues to grow, their annual turnovers increase, and whatever they have to pay as income tax, or as interests on loans, is more or less neutralised. They conceal their own incomes, convert their savings into assets and avail themselves of their resources as sureties for taking huge loans from banks and financial institutions. It means that loans are availed only by those who do not actually need them; those who are in need of financial support have little chances of getting their application for loans accepted.
It can be seen that introducing assets tax, which is closer to Zakah system, can reverse all these damaging effects on economy. The replacement of income tax by assets tax will have far-reaching consequences on the economy.
1. People will no longer have to conceal their incomes in order to avoid taxes; they will have no hesitation in depositing their money in banks or investing in stock market.
2. People will find it less profitable to create assets. They would prefer to invest either directly through their own enterprises or through banks and stock exchanges. It would be doubly advantageous for the common people; save assets tax, and also increase their income.
3. With the sloping demands for lands, houses, gold and precious items (because assets of more than a specified minimum limit will be taxed), the prices of these items will show a downward trend. In fact, the inflationary trend will generally be in check.
4. The rich will prefer to use their own money rather than take loans from financing agencies, for it would be more expedient and beneficial. The less privileged will therefore have greater chances to get their applications of loan sanctioned.
5. With the generous supply of money, rates of interest on loans will tend to decrease.
6. With houses available at lower prices, the middle class and the poor will have bigger opportunities to have their own houses.
In the same way, production-tax can be a tax equivalent to Ushr, and may be applied on all forms of production, agricultural or industrial. This should be only in the form of produce, not money, and the items collected in this way must be redistributed among the needy or gifted to those who have been involved in exemplary services to the people.
(The writer is Executive Chairman, International Centre for Applied Islamics, and can be reached at javedjamil@redif fmail.com)
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