Islam as a religion covers every aspect of life. Islam permits private property but objects to absolute authority over it.
"You are the owner of a big property—enjoy it as a trust. For your maintenance, spend as much as you like according to shariat. But you should share it with others.”
Zakat, or charity, is one of the religious institutions of Islam. There are two classes in capitalistic society: the rich and the poor, and Zakat is an obligatory charity by the rich to the poor. About 1/40th of the excess wealth (Nisab), i.e., 2.5%, should be paid by them. After maintaining his family, if a man has excess money of Nisab value (it can vary based on location and prevailing economic conditions) in a year, he will be required to pay Zakat.
This is a yearly compulsory contribution upon the rich. In a Muslim state, it should go to the Baitul Mal, the state treasury, and from there it should be spent for the benefit of the poor and needy, as directed in the Quran. In a non-Muslim state, it may be exercised as a private charity.
Zakat—which may be called a tax upon savings—tries, on the one hand, to equalize the distribution of national wealth and, on the other hand, provides inspiration for investment. No one likes to give Zakat every year out of his fixed savings and exhaust them. So it encourages investment—the rolling of money—and provides employment to the poorer section.
Zakat is also a kind of direct tax, with all the merits of direct tax. It discourages the concentration of capital in a few hands and promotes social justice. This is one of the ancient types of tax based on the conditions of ancient Arabia, which needs some modifications in this modern technical age. Even during the reign of the Khulafa-e-Rashidin, it was modified to some extent. Zakat upon horses was introduced by Hazrat Umar, and helpless, poor, and aged non-Muslims were also helped by Zakat.
Now the day has come for some modifications. It is necessary to clarify the concept of 'Nisab'—defined as the annual excess amount of wealth after meeting necessary expenditures. The difficulty lies in distinguishing between necessity and luxury, as this varies by degree from person to person and place to place. What one person considers a conventional necessity may be seen as a luxury by another. Therefore, both expenditure and Nisab will vary, even if the incomes of these two persons are equal.
By closely investigating the matter, we may identify some items upon which Zakat can be imposed.
Another fact which strikes us is the rate of Zakat. For example, it is hardly justifiable that a person having wealth of Tk 5,200 will pay Zakat at the same rate as another person having Tk 52,00,000 in savings. The real burden, the amount of sacrifice borne by the payer of Zakat, should be taken into account, not just the amount of money they are sacrificing.
In Bangladesh, Zakat is not collected in the state treasury. Here, it is purely a private charity. As a result, those who are truly needy sometimes do not receive the benefit of Zakat, despite the purpose set forth in the Holy Quran.
More attention should be given not to the rate and rules of collection but to the aims and purposes for which it was intended. It is desirable that Zakat should be collected in the state treasury and spent in an organized way for the sick, the unable, the helpless, indebted persons, poor students, and for a variety of social well-being and welfare purposes.
With some modifications, the noble religious institution will become one of the best types of taxation and also the cardinal principle of public finance in the modern Islamic world. If accompanied by 'Usar', another type of charity in Islam (where 1/10 of the crops is to be sacrificed), it will make the distribution of national wealth more equitable.
