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Taxation in Islamic Economy
His views about taxation policy in an Islamic state are derived from the application of the same overextended personal logic and individual ijtihad that he has used throughout the book. In order to establish a "basis for a state taxation of income and wealth," he cites two ahadith (p. 168) and then makes the following statement: "Therefore it can be deduced that in the Islamic perspective all forms of income and wealth are taxable whether it is the profit of capital, the wages from labor, the return to entrepreneurship, or the produce of the land, or whether wealth is held as precious metals, bank accounts, real estate, or any other form. This accords with the Shariah's rule of the permissibility of things unless categorically prohibited" (p. 169). It is quite clear that with this statement, the author is not only turning the principle of permissibility upside down, he is also erroneously providing a justification for the government to have a free hand to levy a tax on every imaginable economic resource. The author's conclusions are clearly wrong and untenable for the following reasons: The first hadith is specific to zakah, while the second hadith only mentions a duty on property apart from zakah, which can be met through sadaqah and other extra charity. There is no other hadith that one can quote to justify any mandatory collection of any other tax in Islamic economy. In times of special need, the Prophet used to ask for contributions from the citizens. This practice further proves that in an Islamic state, tax levies are not fixed or mandatory. Rather, they are primarily ad hoc and need based and at times voluntary. Therefore, the clear and unambiguous conclusion from this practice in the context of current economic policy is that the only space- and time-neutral mandatory obligation on all Muslims is to pay zakah. As for other taxes, their collection depends primarily on the needs of the economy and the consensus of the citizens with regards to the amount of services they expect from their government.His views about taxation policy in an Islamic state are derived from the application of the same overextended personal logic and individual ijtihad that he has used throughout the book. In order to establish a "basis for a state taxation of income and wealth," he cites two ahadith (p. 168) and then makes the following statement: "Therefore it can be deduced that in the Islamic perspective all forms of income and wealth are taxable whether it is the profit of capital, the wages from labor, the return to entrepreneurship, or the produce of the land, or whether wealth is held as precious metals, bank accounts, real estate, or any other form. This accords with the Shariah's rule of the permissibility of things unless categorically prohibited" (p. 169). It is quite clear that with this statement, the author is not only turning the principle of permissibility upside down, he is also erroneously providing a justification for the government to have a free hand to levy a tax on every imaginable economic resource. The author's conclusions are clearly wrong and untenable for the following reasons: The first hadith is specific to zakah, while the second hadith only mentions a duty on property apart from zakah, which can be met through sadaqah and other extra charity. There is no other hadith that one can quote to justify any mandatory collection of any other tax in Islamic economy. In times of special need, the Prophet used to ask for contributions from the citizens. This practice further proves that in an Islamic state, tax levies are not fixed or mandatory. Rather, they are primarily ad hoc and need based and at times voluntary. Therefore, the clear and unambiguous conclusion from this practice in the context of current economic policy is that the only space- and time-neutral mandatory obligation on all Muslims is to pay zakah. As for other taxes, their collection depends primarily on the needs of the economy and the consensus of the citizens with regards to the amount of services they expect from their government.
Economy
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