 Zakah and Tax |
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Zakat and Tax:
Some people might
think Zakat is a form of tax. It is not. Zakat and tax are two entirely
different things. One is a spiritual act and an obligation as a caring human
being and the other is a requirement of secular law. The concept of Zakat is to
assist the poor and those who are suffering in order to help them end their
suffering and get back on their feet.
Zakat is related to religious and tax is related to
government. In no way Zakat and tax can go together; they are different in many
respects. While zakat has a religious sanctity, tax is not like that.
Zakat is fixed as per the Holy Quran and cannot be changed by
any person. Zakat is a permanent system whereas tax is not. Zakat is calculated
at 2.5 percent of the annual income of a person or a family. On the contrary,
the government has certain rules and regulations for fixing tax. While there is
no change in the percentage of Zakat given, the government has the right to
make changes in the tax from time to time.
Difference
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Alms (Zakat)
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Tax
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Meaning of Name
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clean, grow and thrive
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Debt, taxes, tribute
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Basic Law
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Al-Qur `an and Sunnah
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The law of a country
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Nishab and Rates
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Ordained by God and is absolute
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Determined by the state and the relative zakat has a fixed size while tax
varies according to the balance of the state budget
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Nature
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Obligations are fixed and constant
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Obligations in accordance with the requirements and can be eliminated
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Subject
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Muslim
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All citizens
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Object Allocation
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Fixed 8 Group
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To fund the construction and regular budget
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Worn Treasure
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Productive assets
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All Assets
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Terms Ijab Kabul
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Required
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Not Required
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Rewards
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Reward of God and the promise of blessing treasure
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The availability of public goods and services
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Sanctions
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From Allah and the Islamic People
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State
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Motivation Payments
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Faith and devotion to God Obedience and fear in the country and the
sanctions
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There is a tax payment made possible the manipulation of large amounts of
property tax payers and this does not happen to charity
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Calculation
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Entrusted to muzakis and can also help by ‘amil zakat
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Always use the services of a tax accountant
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The way of its distribution and spending is defined by God, which means
that Zakah funds cannot be spent in other areas, even though they may be
urgently needed by the Muslim community. For example, Zakah funds cannot be
spent to build a road, or train policemen, etc. Taxation, on the other hand,
provides a government with funds to carry out a wide range of services.
Before talking of the difference between Zakat and Tax, let me first define
What Zakat and Tax are. Zakat is an Arabic word that stands for a religiously
sacred worship of giving alms to the needy of the society. It is a sacred
charity and an obligatory pillar of Islam besides Tauheed (belief in the
oneness of God), Salat (Prayer), Sawm (Fasting in the month of Ramzan) and Hajj
(pilgrimage at-least once in life to the Holy places in Mecca and Madina).
Tax on the other hand is a compulsory contribution in monetary terms to be made by every one out of his or her income and expenditure on consumption (of goods). Tax is levied by the governments upon the citizens of state.
Tax on the other hand is a compulsory contribution in monetary terms to be made by every one out of his or her income and expenditure on consumption (of goods). Tax is levied by the governments upon the citizens of state.
Similarities and Dissimilarities Between Zakat and Tax
There are some important similarities and dis-similarities between Zakat
and Tax.
Similarities
a) Zakat is liable to be collected by force like tax, if the payer does not
pay it willingly. This position is applicable where the state compulsorily
collects Zakat, and in modern days, has legislated accordingly. The Quran and
the Sunnah make it very clear that it is the obligation of an Islamic
state which follows Islam to collect Zakat. An important proof in this
regard is the decision of Hazrat Abu Bakr (R.A.), the first head of the state
of the Islamic Khilafat, to wage war against those who denied to pay
Zakat to the state.
b) Zakat collected in an Islamic state has to be kept in the state
Treasury, in a separate account, like tax. Zakat is collected by the
state through Zakat officials (Amelina Alaiha). However, if Zakat is collected
by Non-government organizations or communities, these should be kept safely as
in the case of any public fund.
c) Zakat, like tax, is paid though there is no direct and equivalent economic
benefit is obtained by the payer This is a different matter that Zakat
payer expects return in the life hereafter and the tax payer may receive some
service from the state in return but there is no direct co-relation
Dissimilarities
a) There are also important conceptual and other differences between Zakat and
Tax. Primarily, Zakat is an Ibadah (act of worship) which Allah has made
compulsory on human being, to express gratitude to Him and to obtain His
nearness (Taqwa). Tax is not the same thing as Zakat. Tax is a
social obligation without having special sense of gratitude to Allah or
to obtain nearness to Allah while Zakat is essentially a matter between
Allah and His servants, but tax has been primarily a matter between citizens
and the state authorities..
b) Zakat is based on Nisab, any wealth below a limit is exempted from
Zakat. This is not true in case of many taxes in modern times. Concept of
exemption is there in case of tax but it is applicable only when and
where the Government or Tax authorities specifically prescribe.
c) Zakat is a permanent and regular system. None can change it in any
way. On the contrary, most of the taxes undergo change from time to
time.
Zakat is compulsory only for Muslims. As the Income Tax Act 1967, Section:
6A(3) states, “a rebate shall be granted for any zakat, fitrah or any other
Islamic religious dues, payment of which is obligatory.”
A Muslim has to make two compulsory payments levied on the same source of
income every year, namely income tax and zakat.
Therefore, this rebate is given to relieve a Muslim from the burden of
“double taxation” on the same income.
Islam has a completely different perspective on the economy and tax as
the Islamic basis is different to that of capitalism. Fundamentally taxation in
Islam and under the khilafah puts the emphasis of taxation on wealth rather
than income. The Islamic taxation system does not tax income, but taxes wealth.
This means that the average person will be left with more disposable income and
will be liable for tax on whatever wealth is left at the end of the year. This
will have a significant effect on the economy. the wealth tax falls at 2.5%.
This means that the within one year, the average person can save at is at least
£10,000. This means that the average person will have an extra £700 to spend
each month as he will not be taxed on his income.
Taxation is the system states use to raise money to finance government
spending. Governments use tax revenues to pay the army and police, to build
dams and roads, to operate schools and hospitals, to provide food to the poor
and medical care to the elderly, and for hundreds of other purposes. Without
taxes to fund its activities, government could not exist.
The Quran pays great attention to zakat. In fact, it mentions it next to
salat almost everywhere. This shows the high status of zakat in Sharia. “Then it must be known that
zakat is the sister of Salat and the Almighty God has mentioned them together
in His Divine Book, the Quran, implying that if one refrains from paying Zakat,
one’s performing Salat will also be null and void”. The main purpose of zakat is to combat
poverty and deprivation, and to immunize society against need and economic gulf.
In economics, tax is discussed under the general topic of
finance. Among different definitions proposed for “tax”, I.M.F’s definition is
adopted in the international manual for budget classification. The definition
runs as follows: “the amount of money collected by the government for public
expenditures which is not refundable and compensated for”. According to this
definition, the three characteristic features of tax include:
1. being
collected in cash;
2. being
mandatory and not refundable;
3. being
spent for public purposes.
Tax and Zakat are not interchangeable. There are elements common between
them but they still differ from one another. Zakat is an institution in Islamic
Sharia fixed and permanent belonging to first-order obligations. It existed in
previous religions as well. Taxation, on the other hand, is an institution
belonging to second-order obligations of Sharia. It is left to the state to
decide about. This is why it cannot be replaced with tax.
Zakat (زكاة) is Arabic for obligatory charity (the third pillar of Islam). It
constitutes a portion of wealth prescribed by shari'ah to be paid to one
or more of deserving recipients. It is the duty of every Muslim to pay zakat out
of his/her own wealth, provided that a minimum amount of wealth (nisab) is attained over a lunar year.
On the hand, tax is a
compulsory contribution to state revenue, imposed by the government on income
and profits (direct taxes). It can also be added to the cost of some goods,
services, and transactions (indirect taxes)
There are several instruments
that can be adopted and promoted by the Indonesian goverment. Zakah is very
relevant instruments to be used as one source of local goverment revenue,
considering that Indonesia is the largest Muslim country in the world.
Zakah has the potential of
increasing the fiscal capacity of the government is still need today. Zakah is
widely also imply, directly or indirectly, will be able to:
- First, maintain the minimum wage of workers at the level of the distribution of zakah;
- Second, as the final shield of the economy so that no stagnation / consumption under crisis conditions.
- Third, pressing the accumulation of wealth, possessions forced turnover
- Fourth, press the number of social problems; crime, prostitution, vagrants, beggar, etc
- Fifth, quard aqidah
- Sixth, in mathematical proofs, zakah not decrease consumption, because the next process will be neutralized by the mustahik consumption.
Even during the reign of Umar Bin
Abdul Aziz under the Umayyad dynasty, in less tahn three years, the number of
zakah payers continues is increases, while the number of recipients continues
to decreases (Huda et al, 2012). As a result of excess surplus be used to
subsidize private debt payments (private).
Social subsidies in the form of
financing basic needs that are not the responsibility of the state as to bear
the entire cost of wedding every youth who want to get married at young age.
Zakat is an act of worship
(Ibadah) and not a tax
Owed a specific assets only,
identified by Islamic Law as assets having the potential for growth, i.e “Zakatable
Assets”
Source:
https://www.youtube.com/watch?feature=player_detailpage&v=kAJ0nK1qUUE
Al – Iqtishad: Vol VII No.2, Juli 2015
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