Discussion on the Foundations of Taxation Policy

I find that there are conceptual errors in the treatment of the entire subject. The first error that I point out is that there seems to be a misconception about the individual rights that are recognised in Islam and the rights of the society.

Secondly, a narrow approach has been adopted in respect of the objective of Islamic state. The author has a misconception about protection and nourishment of religion. Protection and nourishment of religion has much more connotation than what he suggests. I would refer the author to the Ayah in Quran which suggests a clear integration of Dunya and Akhira.

The author has treated the subject of taxation not from the economist’s point of view but from the legal point of view. He thinks taxes are encroachment on individual rights. If state offers some services or facilities and in return demand certain levies then this cannot be considered as an encroachment on individual rights.

I am not clear about the author’s plea that taxes can be imposed as a temporary measure only. How can we define temporary? There are situations that demand levying taxes which are not of temporary nature.

Author has a very static approach towards the concept of subsistence to be provided by the state. Subsistence level is a relative thing.

Dr. F. R. Faridi

I think that this paper needs to be rewritten in such a way that it will formulate a theory of public goods which is consistent with what author believes in. Author agrees that some goods should be provided by the state. If he agrees to this then he should develop a theory of public goods. What would be the pricing policy for goods where the principle of taxation cannot be applied!

Dr. A. A. Salama

I would agree with the author that government should not be allowed to indulge in taxation arbitrarily. But the author is not consistent in his argument because he also provides a blank cheque for defence. We all know that so many arbitrary things happen in the name of defence.

Similarly author is against the government spending for welfare but then he also pleads for the maintenance of a subsistence level which I think is a part of welfare.

Iri short, I would say that the intentions of the author are alright but sometimes he has made statements in a very contradictory manner.

Prof. Syed Nawab Haider Naqvi

We have to be clear about all economic objectives of the Islamic state of today.

Some welfare spending has been done in early periods of Islam also. For example, Umar, the second Caliph, used to give certain aid to all children. This is a welfare spending. The welfare activities of state are bound to increase over times. Taxes should, therefore, be elastic to meet these expenditures.

Islamic government has the right to impose additional taxes for various reasons and they cannot rely on voluntary contributions.

While suggesting public debt as a source of government financing, the burden of public debt should not be ignored.

Dr. Mohammad Sakr

The question of the extent of taxation will differ from state to state. We cannot have a generalized or standardized approach. The author has not provided enough references from Fiqh to substantiate his arguments.

I would like to clarify one point that has been raised by Anwar Siddiqui and others. It has been said that Zakah collected is so small that it cannot be substantially used to alleviate poverty. I want to clarify that current small collection of Zakah does not reflect the overall potential of Zakah in the country. The foreign participants should not take the impression from the current Pakistan experience that Zakah cannot be a significant tool in alleviating poverty.

Dr. Ziauddin Ahmed

The paper lacks originality. Secondly, the plea that we should do only what has been done in the early periods of Islam irrespective of how the present economies differ from the earlier economies, is not a reasonable attitude.

Dr. M. M. Metwally

About the question of defence expenditure I would point out that the defence does not mean simply protecting the word of God. The relative strength of Muslims vis-a-vis non-Muslims is important and this should be taken into account while formulating policy on public expenditure. Another point on which I want him to reflect upon is that he should try to study taxation system during the period of Khilafat-e-Rashida. In period of Khilafat-e-Rashida, whenever need arose, new taxes were imposed. Later on, however, in the period of feudalist systems, Muslim Fuqaha became cautious in giving arbitrary powers to the state to play with the wealth of the people. This thing should be kept in mind. The author should not forget that taxes in modern society which come through Shura and Ijma will be quite different from those arising out of Zu/m.

Prof. Khurshid Ahmad

With regard to the definition of those eligible from Zakah funds the author clarifies the population into three classes: the rich, the middle class and the poor. According to him the last should be completely exempt. I think he must consider a suggestion that middle class is a blank category. It can be further divided into sub-sections, that is, a lower middle class and upper middle class and perhaps upper middle class could be shifted towards the rich and the lower middle class could be shifted into the poor.

Dr. Muhammad Uzair

Author has restricted himself to the Fiqh consideration only. It is quite legitimate because Fiqh is not obliged to take account of being progressive or reactionary or things like that. It has its own sources. Therefore, the comments of the discussants have been a little besides the point. They do not give any reference of Hadith or Ayah against what author has said. I think his approach is commendable.

Dr. Fouad Agabani

Source: Fiscal Policy and Resource Allocation in Islam, Ziauddin Ahmed, Munawar Iqbal and M. Fahim Khan. Republished with permission.