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Theory of
taxation in
islam
 PRESENTED BY:

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No.45 No.49 No.54 No.38 NO.28
Hassan Faizan Ubadah Ali raza Hamza
Tax
"TRANSFER OF WEALTH FROM HOUSEHOLD OR BUSINESS
TO THE GOVERNMENT FOR WELFARE PURPOSES."
Traditional word used
for tax
MAKAAS WHICH DENOTE "TAX" THE PERSON WHO
COLLLECT TAX IS CALLED AL-MAKAAS.
Purpose to collect tax
For milatary expenditure

For welfare purposes

For salaries of soliders

teachers and servants etc.

For emergency

To pay loan
Types of tax from where tax is collected

Income tax Sale tax Property tax Tariff

 Islamic point of view about tax

 Tax and Quran

In the “Holy Quran” there is no concept of Tax,
“Zakat” is only mentioned in the Quran.
 Tax and The Era of the Holy Prophet (PBUH)
In the start there was only Fay, and ,Sadaqat were main financial.
after the obligation of Zakat in 2nd H , it became the main source
of revenue of islamic state. Thus, proper taxation system was
not different sources of tax collection at the time of the Holy
Prophet (S.A.W) were Zakat ,Saddaqat,and Jizya.
 Tax and the period of Caliphs

 There no change in the revenue sources in the period

of Hazrat Abu Bakar (R.A) but in the period of
Hazrat Umer (R.A) when he conquered Iraq and
Seria then the start to get “Kharaj” and “Usher”.
 Views of scholars about Tax

 There were some Imam’s point of view about Tax

which are given below:-
Imam Malik (R.A)
“He states that if conventional sources of revnue
are not enough and our expenditures are more ,then
we can apply tax on a state.”
Imam Azam(R.A)
“He states that tax should be imposed
only when Zakat fund is inadequate to meet the
needs of the poor.”
 TAX SYSTEM IN ISLAM

Taxes in general terms are a financial

obligation imposed by the state on public,
From which the state spending on the public
walefare or public interest.
The level of taxation in any nation will affect
people behaviour ,including their chose in
working , saving and investment or investing.
West taxation has created a number of
problems in wealth distribution. Where the
burden falls heavily the poor with rich
utilishing tax loopholes and tax havens.
Islam is a complete code of life. Islam has a
completely different perspetive on the
economy and tax as the Islamic basis is
different to other system.
The Islamic system does not enforce tax on
income. Islam is enforce tax on wealth.
Holy Prophet (S.A.W) say
‘’collector of tax who
acts unjustly will not enter the paradise’’
Islam is a complete code of life. Islam has a
completely different perspetive on the
economy and tax as the Islamic basis is
different to other system.
The Islamic system does not enforce tax on
income. Islam is enforce tax on wealth.
Holy Prophet (S.A.W) say
‘’collector of tax who
acts unjustly will not enter the paradise’’
 TOOLS OF TAX IN ISLAM
➢Zakat
➢Ushr
➢Jizia
➢Kharaj
➢Sadaqat
➢Waqf
➢Daraib
 ZAKAT
Zakat is derived by Arabic word ‘’ Zakah’’
Zakat is a form of alms giving treated in Islam as
a religion tax . Zakat is a religion duty for
Muslims who meet the necessary criteria of
wealth.
Zakat has enjoined upon the rich Muslims so
as to achieve a kind of social security ,
solidarity and financing some common
interests.
So much is the importance of Zakat in Islam that
it has been mentioned at eighty two place in
Quran in close connection with prayer.
According to Holy Prophet (S.A.W)
‘’I gave the pledge of allegiance
to Holy Prophet (S.A.W) for offering prayer
perfectly , giving Zakat and giving good advice
to every Muslims.
 JIZYA
Jizya or Jizyah is a per capita yearly taxation
historically levied in the form of financial charge
on permanent non – Muslims subject of a state
governed by Islamic law in order to fund public
expenditures of the state.
Jizya is not pay poor non –Muslims , women ,
children elderly slave and foreigners non –
Muslims
Jizya rate was usually a fixed annual amount
depending on the financial capability of the
payer .
 USHR
Zakat on agriculture land . Ushr is a kind of zakat of
harvest and produce of fruit.
Rate of Ushr
5% Ushr payable at the total
output on agricultural produce
irrigated artificially .
10 % Ushr payable at the total
output on agricultural produce
irrigated naturally.
According to Holy Prophet (S.A.W) has said
‘’It is obligatory to give away one-tenth of the farm produce if the
land is irrigated by rain or naturally water, and one –half of one
tenth if it is irrigated by drawing out water from the well
etc’’
The Quran says
‘’ and give away Allah’s due at
the harvest time’’
‘’ O Believers ! Expend in Allah’s way the best
portion of the wealth you have earned and
of what we have produce for you from the
land’’
 KHARAJ
• Kharaj is an Arabic word
• Karaj means a landowned tax imposed on
non-Muslims.
Kharaj is a type of individual Islamic tax on
agricultural land and its produce developed
under Islamic law.
The Holy Prophet (p.b.u.h) Period
After khaibar war when Jews requested for
the land that Muslims had conquered to
remain as theirs because they were very goo
farmers.
The Holy Prophet (p.b.u.h) consented to the
request on the condition that they surrender
half the revenue obtained from the land tax as
Kharaj.
Principles of Tax Policy in Islam
Points
• Tax should be
imposed under dire
necessity.
• The period of
taxation should
coincide with the
period of need.
• Taxation should fulfill
the objectives of the
Islamic government.
Points
• Taxation should
correspond to the
capacity of tax
payer (ability to
pay).
• The principle of
equity.
• The principle of
certainty.
Points
• The principle of
convenience.
• The principle of
economy.
 Conclusion
• Most Muslim economists write that an Islam state, being a welfare state,
can levy additional taxes to fulfill its duties.
• However, the authority of the Islamic state to impose taxes is not
unlimited . Further the Islamic state must adjust the level of taxation to
the economic condition of the people. At the same time it must strive to
keep its expenses at the lowest level. It is argued that the Islamic State has
the right to Levy taxes for the following reasons:
• 1. To fill the resources gap created by the shortfall in Zakat and Sadaqat .
• 2. To fill the objective gap but again it is essential that first the Islamic
state should demand voluntary contributions to meet these needs. If
these are not forthcoming or fall short of the need, the Government
should resort to taxation.
• Sum-up : The sum the whole discussion is that the Islamic state is
authorized to impose taxes in addition to Zakat as a supplementary or
complementary policy, so that run the state affairs satisfactorily.
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