The Tragedy of Zakat and Taxes

The collection of zakat on gold and silver (i.e., money) ended sometime during the caliphate of Uthman ibn Affan (ra). It continued for a while to be collected on grazing animals and agricultural produce as collectors were still assigned and sent out. The latter (cattle and agriculture) were perhaps the most important zakat properties at that time, but it seems clear that money is far and away the most important in our times.

Sadly, though it is the third pillar of Islam, is mentioned 26 times in Allah’s book and is frequently paired with prayer itself, it has been very largely neglected in our time. As an organized system the way it was instituted by Allah’s Messenger, this neglect is nearly 100%.

Even sadder than that, is that most Muslim countries and even individuals have come to accept various forms of taxation which we have adopted from the non-Muslims. These include sales tax, income tax, customs duties and other things. It is never lawful for the ruler to take the wealth of citizens in Islam without a clear evidence and reason and never under any circumstances if the funding sources instituted in the Law itself have been abandoned and not put into practice prior to levying other forms of taxation.

The Prophet (sas) said at the Farewell Pilgrimage, as recorded in Sahih Al-Bukhari:

 Your blood, your wealth and your dignity are sacrosanct among you like the sanctity of this day of yours in this month of yours and this land of yours. Let the one present deliver this message to the one absent, for the witness may deliver it to another who understands it more then he does.  فَإِنَّ دِمَاءَكُمْ، وَأَمْوَالَكُمْ، وَأَعْرَاضَكُمْ، بَيْنَكُمْ حَرَامٌ، كَحُرْمَةِ يَوْمِكُمْ هَذَا، فِي شَهْرِكُمْ هَذَا، فِي بَلَدِكُمْ هَذَا، لِيُبَلِّغِ الشَّاهِدُ الغَائِبَ، فَإِنَّ الشَّاهِدَ عَسَى أَنْ يُبَلِّغَ مَنْ هُوَ أَوْعَى لَهُ مِنْهُ

Also reported by Al-Bukhari, the Prophet (sas) said:

 I have been commanded to fight the people until they bear witness that there is no deity but Allah and that Muhammad is His Messenger, establish the prayer and render the zakat. When they do that, their lives and property are in absolute protection from me except for the right of Islam – and their judgment is up to Allah.  أُمِرْتُ أَنْ أُقَاتِلَ النَّاسَ حَتَّى يَشْهَدُوا أَنْ لاَ إِلَهَ إِلَّا اللهُ، وَأَنَّ مُحَمَّدًا رَسُولُ اللهِ، وَيُقِيمُوا الصَّلاَةَ، وَيُؤْتُوا الزَّكَاةَ، فَإِذَا فَعَلُوا ذَلِكَ عَصَمُوا مِنِّي دِمَاءَهُمْ وَأَمْوَالَهُمْ إِلَّا بِحَقِّ الإِسْلاَمِ، وَحِسَابُهُمْ عَلَى اللهِ

Note: In case any reader is not aware of these issues in Islam, the above hadith could be taken out of context. The point of this statement of the Prophet (sas) is the sanctity of the lives, wealth and dignity of individuals and that it can never be taken from them except with a specific dispensation in the Law. As for “fighting the people until they become Muslim”, we of course know from many other texts and from the life of the Prophet (sas) himself and those after him that there are other options and people can live in peace as non-Muslims under Muslim governance and many have done so in the history of this nation. However, that is not our current topic.

Aside from the general principle of the sanctity of citizen’s wealth except with a specific dispensation from the law, many of these forms of taxation were known in the time of the Prophet (sas) and have been expressly prohibited in the strongest of terms.

Some of the favorite taxes in the world today are sales taxes, income taxes and customs duties (tariffs). These are very, very forbidden in Islam – even more so if the legitimate sources of public funds have been abandoned! Once, during the lifetime of the Prophet (sas), a woman confessed to adultery and insisted on the punishment as a purification and the completion of her repentance. Eventually, the punishment was carried out. One of the Companions uttered a curse against the one being stoned. Hearing this, the Prophet (sas) said as recorded in Sahih Muslim:

Easy, O Khalid! For by the One in whose hand my soul is, she has repented such a repentance that if only the taker of maks would repent like this, even he would be forgiven!” Then, he (sas) ordered for her to be brought, he made the funeral prayer on her and she was buried.  مَهْلًا يَا خَالِدُ، فَوَالَّذِي نَفْسِي بِيَدِهِ لَقَدْ تَابَتْ تَوْبَةً لَوْ تَابَهَا صَاحِبُ مَكْسٍ لَغُفِرَ لَهُ»، ثُمَّ أَمَرَ بِهَا فَصَلَّى عَلَيْهَا، وَدُفِنَتْ

So, what is this maks which according to the words of our Prophet (sas) is more heinous and more in need of repentance than adultery? It is sales tax! The word was mostly used to mean small amounts that rulers would collect on every sales transaction.

It also covers customs duties and tolls on roads as these were other ways the word was used. Moreover, governments cannot take anything at all from their citizens unless:

  1. All methods ordered or allowed by the Law have been completely implemented, but are insufficient to meet a pressing need.
  2. An extraordinary situation or necessity requires the collection of additional funds. In that case additional levies could be allowed ONLY to the extent and for the period of the necessity at hand.

Even if the conditions of #2 arise, it is never permissible to jump over #1 and those must be put in place first.

All governments need sources of public funding to maintain the safety and welfare of their citizens. Islam is no exception to that. However, one of the biggest tragedies of this Ummah is that we have abandoned the methodologies commanded and permitted by Allah in favor of criminal acts which Allah has forbidden.

Every time we depart from what Allah gave us we go to something inferior in this world and in the next. Economists understand that while public funds are a necessity, there is a balance between the harms and the benefits of various methods of collecting these funds. The positives are clear: this is how government can fund public safety, defense, education and other things. The harm of most kinds of taxation is that they suppress the economy and economic activity, which in turn reduces the base for the taxes in the first place. They can also increase poverty and make life more difficult for those who have less.

Most Taxes Stifle Economic Activity

This is more pronounced the more funds are taken from people who have less. This is because if it were not taken, they would have spent it on their needs and wants. This economic activity has a ripple effect on those who provide those goods and services and on up the chain. On the other hand if money is taken from wealthier people, it has no effect on their spending and may only reduce the amount of idle wealth they have in savings.

Zakat is far superior to all modern methods of “taxation” or means by which governments collect funds for needed services from the citizenry. This is because it is only taken from “excess”. Since zakat is only due on wealth that was in one’s possession for the entire year, it is clear that it was not needed during that entire period. The focus here is on getting wealth which was “doing nothing” back out into the active economy. This is a pure benefit with no downside.

When you collect funds from people who otherwise would have spent it on their needs and wants, it is two-edged sword. Yes, you get the needed funds for public services but on the other hand you push economic activity down. Such taxes over time tend to destroy their own base and may have to be raised repeatedly as the economy slows. Because zakat is taken exclusively form excess and idle wealth, it has no such negative side-effects, in fact exactly the opposite!


How to Pay Zakat (Money)

Originally, Zakat was Collected in a Specific Month

As zakat was implemented by Allah’s Messenger and his righteous successors, one would not have to be concerned about “how” to pay zakat, when to pay it or to whom it should be given. The ruler’s appointee would inform everyone about all of that and come directly to receive anything due to be paid (well, OK in our age possibly electronically, but you get the idea).

You should note when reading what scholars had to say about zakat that ALL of this fiqh was written well after the original zakat commanded by Allah and implemented by His Messenger had come to an end. Thus any discussions about to whom zakat can be given would originally only be relevant to the ruler and those hired to manage the zakat. Individuals had no need of this information to fulfill this third pillar of Islam.

Absent the Original System, We Must Act on Our Own

Now, however, we as individuals are forced by necessity to take on all of these roles. We have to decide when we will assess and pay our zakat and then, since for most of us the institution of zakat is not there, we have to figure out who or what are appropriate recipients and how to deliver it to them. This is the best we can do in our current situation and it is nonetheless VERY IMPORTANT. Sadly, many of us don’t have even the basic knowledge needed to carry out this new function. It is also very easy to neglect our obligation since there are not enough reminders or discussions on the topic to keep it in our consciousness.

This is serious. Please make sure from this day that you have a plan, know how to do the calculations and are prepared to fulfill this obligation once every year. It is the third pillar of Islam and not something we can afford to ignore or be negligent about.

When Should We Pay Zakat?

Zakat was collected in a specific calendar month, except in the case of dry-able fruits and grains on which zakat was collected at harvest time. This is clear from a variety of narrations including well-authenticated ones that as late as the time of Uthman ibn Affan, there was a specific month of the year when zakat was paid by everyone. This is well established from the fact that we know collectors were sent out. Also, in several authenticated (sahih) narrations, we know that Uthman said on the minbar:

  This is the month of your zakat, so whoever has any outstanding debts should pay his debts in order to establish his true balance and pay his zakat from it.  هَذَا شَهْرُ زَكَاتِكُمْ فَمَنْ كَانَ مِنْكُمْ عَلَيْهِ دَيْنٌ فَلْيَقْضِ دِينَهُ , حَتَّى تَخْلُصَ أَمْوَالَكُمْ فَتَؤَدُّوا مِنْهَا الزَّكَاةَ

What isn’t completely clear is whether this month is Al-Muharram or Ramadhan. There are narrations to support each, but nothing clear or validated enough to establish a ruling.

Muharram is the Beginning of the Year

Since most of us will be doing this by ourselves – starting from nothing as it were – we will first have to PICK which month will be our “Zakat Month”. It seems like Muharram is better supported. It also seems like the best idea since it is the beginning of the calendar year and in Ramadhan we have to give zakat al-fitr. There is already a lot of confusion among Muslims regarding zakat, many believe it is only one thing and it is done in Ramadhan, so keeping them separate by specifying Al-Muharram as the month of zakat would be most beneficial.

ِImam Ash-Shafi’i said (as reported by Al-Mawardi):

And I prefer that the ruler dispatch the collectors to arrive where they are collecting with the beginning of the new year and collect what is due. I like for that to be in the [first] month of Al-Muharram, whether it falls in winter of summer.   وأحب أَنْ يَبْعَثَ الْوَالِي الْمُصَدِّقَ فَيُوَافِي أَهْلَ الصَّدَقَةِ مَعَ حُلُولِ الْحَوْلِ فَيَأْخُذُ صَدَقَاتِهِمْ وَأُحِبُّ ذَلِكَ في المحرم وكذا رأيت السعاة عندما كَانَ الْمُحَرَّمُ شِتَاءً أَوْ صَيْفًا

So, be prepared to pay your annual zakat in the first month of the Islamic year Al-Muharram.

How Do I Know What is Due?

The main item most of us will need to look at for zakat purposes is money. If you have grazing animals, produce honey, do mining or other mineral extraction or produce crops typically dried and stored like dates, raisins or any of the grains, those things will not be addressed here and you will need to look elsewhere.

Zakat is due only on money which has been in your possession for the entire (past) calendar year. Aisha (ra) reported that the Prophet (sas) said:

 No zakat is due on any wealth until the entire year passes over it. (i.e., with it in your possession)  لَا زَكَاةَ فِي مَالٍ حَتَّى يَحُولَ عَلَيْهِ الْحَوْلُ

Reported by Ibn Majah and others and is authenticated (sahih) according to Al-Albani.

Some scholars have made the rather bizarre statement that this means that whenever you get some money, you watch it and see if it remains with you for one year. Clearly, this is one effect of the fiqh of zakat being developed after the demise of the original zakat system. How is such a thing even possible? In the normal course of life money comes and money goes. One cannot possibly tag each Dirham or each Dollar, giving each amount coming in its own “due date” after one year. That simply cannot work. In any case, there is a general principle that dirhams (or dollars) cannot be distinguished from one another. Thus, as long as one’s balance contained some amounts gotten from haraam, the entire fund is haraam to its owner. So, the issue for zakat is our balance over the year, not the dates on which this dollar or that dollar came into our possession.

So, how does this work? You must look at your balance or the total amount of money in your possession throughout the year. The lowest point of that balance represents those dollars which were in your possession throughout the year. The wisdom of this, of course, is that this represents your “surplus” since you had no need to tap into it for the whole year.

How Do I Calculate the Amount Due?

The amount due as zakat on your savings is 2.5% of the amount you owned throughout the year. As explained above, this means your minimum balance at any point throughout the year. One exception would be debts. In most cases, zakat is still due on money which has been loaned out but which you expect to be repaid or as already been repaid. So, let’s say your minimum balance was $10,000 (it doesn’t matter if it is higher at the time you are actually paying zakat at the end of the year), but you had loaned someone $5,000. This loan has either already been repaid or you anticipate that it will be repaid. You would calculate your zakat as $10,000 + $5,000 * 0.025, or $375.00.

If the amount you own at the end of the Zakat Year is more than the amount you owned continuously for a year (your minimum balance over the year), you can VOLUNTARILY pay zakat based on the year-end total. This is an extra good deed and Al-Hassan Al-Basry and others recommended it. However, it is important to understand that this is above the obligatory and so if this is once again implemented in its original form, it would not be lawful for the ruler to demand the higher amount from Muslims.

So remember, after the Hajj and after celebrating Eid Al-Fitr, start preparing to calculate and pay your zakat for the previous year. Be aware of your balance through the year and remember any low points, since the lowest is the basis of your zakat. Let’s get in the habit of reminding each other every year toward the end of Dhul-Hijjah! These are just the first baby steps in bringing this PILLAR of Islam back to life. It’s not enough but it’s a start.


Does Islam need to be Changed?

OK, this is part of a series of posts that I will be writing in shaa Allah.

Here’s the scenario:

  1. Something very wrong is going on frequently in one or more Muslim lands.
  2. Said wrong is also in clear violation of our Law (I mean shari’a but I don’t like using that word – later on that).
  3. We Muslims failed to do anything about these crimes in our midst for a long time, in some cases centuries. People were hurt and rights violated. The name of Islam was dishonored.
  4. It is called out as part of the ongoing attack on Islam and Muslims and paraded in the media and elsewhere with only thinly veiled inferences that “this is what Islam brought”.
  5. Most of us are quickly divided into two camps:
    1. Heads in sand. Nothing to see here. Move on. Islam is perfect. The Law is perfect and includes everything mankind needs. But, the crimes continue.
    2. Misguided reformers. Look at where Islam took us! Al-hamdu lillahi for the United Nations and all these wonderful people who have brought this to our attention. We will sign up for every program they have set up, use their terminology and methods and eradicate this horrible thing from our backward, Muslim societies.

Get the picture?

The truth is so often found between two misguided extremes.

So, those who SHOULD have explained to us what part of Islam and the Law we have failed to properly analyze, understand and implement to deal with these specific problems are mysteriously silent or off somewhere talking about every OTHER part of Islam mostly in lofty platitudes devoid of real-life application. Those with the most responsibility and accountability in this are the scholars and other social leaders.

Then, we have those who really want to improve the situation but who are quite ignorant of the Law and how it could and should address and solve these problems. Though they may never talk or even think about it explicitly, it is clear that they have come to believe that Islam is the problem and western liberalism is the solution. Others actually advocate this heresy in the open. They both run behind the western and international organizations and unknowingly make a huge contribution to the anti-Islam propaganda themselves.

Some issues of this nature which come to mind are:

  1. Huge disparities in wealth with abject poverty living alongside obscene wealth.
  2. Lack of trustworthiness in business and other areas.
  3. No “rule of law” consistency.
  4. Rampant bribery and corruption.
  5. Kleptocratic rulers stashing billions in their personal accounts.
  6. Spousal abuse.
  7. Forced marriage of very young girls.
  8. FGM.
  9. Abuse of workers of various types.
  10. Intra-familial murder ([DIS]-honor killings).

If we are really “the best nation brought forth for mankind”, how is it that so many of our lands are near the bottom among nations in matters like the above?!

We will see in each one of these cases that there is nothing lacking or in need of change or “reform” in Islam or its Law. Rather, it is our utter incompetence for centuries to:

  1. Understand the Law
  2. Understand our own reality
  3. Understand what our reality SHOULD be
  4. Analyze how – using the Law and our sound reason and intelligence – we can move ourselves and our societies from #2 to #3

The most powerful call (da’wah) we can give to the world is bringing our own affairs and societies in line with Allah’s Law. Nonetheless, this comes after our first concern which must be the Muslim victims of these ongoing crimes and transgressions.

But even worse than that is the fuel it provides for anti-Islamic propaganda. How many souls might have been guided to Islam were it not for these blemishes which are entirely our fault and our failures and shortcomings – all while we have in our possession the greatest and most complete guidance Allah has given to mankind.