(IFER)
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(Suggested By- Zahid Jamil)
The primary objective of charity in Islam is to overcome poverty in a world of disparities. It is important to note, however, that the needs of charity will differ under various social circumstances. More charity will be required when the gap between the rich and poor, the haves and have-nots widens. Keeping in mind these imbalances within economic conditions of individual nations or even the world in general, charitable guidelines should be amended appropriately.
While there is repeated instruction in the Quran for Muslims to pay Zakat and Sadaqat, there are no figures given. The currently practiced concept of 2.5% Zakat on assets/savings poses many challenges. While it is easy to take out 2.5% from liquid assets (e.g. cash, shares or jewellery), it is not possible to do so with non-liquid assets (e.g. a building or block of land). Such assets may or may not even be producing an income. Of those producing an income, they can be categorised into active or passive assets, referring to an asset which produces income through the effort of its owner (e.g. farming land, machinery), OR an asset which produces income without regular work from the owner (e.g. a building which earns rentals), respectively. Usually a passive asset will give lower returns (around 5%) while an active asset will give a higher return (up to 20%) of the asset value.
Secondly, there are an increasing number of elderly people who are asset rich and income poor. Many elderly have a house on rent apart from the house they live in. They very often depend on the meagre income attained from rentals. What formulae should apply to zakat in such cases? Moreover there are an increasing number of young people who earn very high incomes but they do not have assets. Relieving them from Zakat also does not look logical as they should be made to realise their responsibility from a young age.
Taxation by the government in various countries also needs to be addressed. In third world countries, the tax raised by the government is utilised mainly in nation building projects (infrastructure, defence etc). However, in western countries, a fair share of the money raised through taxation is spent on social security. Thus it is quite likely that many Muslims living in western countries may be fulfilling their Zakat obligation through the taxes which they are liable to pay in these countries. Many social security recipients are also Muslims and it needs to be determined that if they are assisting non-Muslim poor through such schemes, how should this contribution be counted.
In many countries, in addition to income, assets are also taxed, however only when the asset is bought or sold. Usually called ‘capital gains tax’, the tax is applicable to the profit made on the asset value when sold. Furthermore, in most modern economies, the percentage of tax rises with income, resulting in high income earners paying a higher proportion of their income in tax compared to lower income earners. Thus, a larger portion of their income is given to social security related charity, which seems a rational outcome.
People living in western countries which have social welfare scheme and are able to create reasonable social equity, would realize how much spending in charity would create a just social structure. On average, an income earner in these western countries pays nearly 20% of his income in tax, nearly half of which is spent on social security. There are additional taxes on assets when bought or sold or on income produced by assets. Thus 10% of income seems to be a reasonable figure. 2.5% on non income producing assets (such as gold & silver) seem to make sense to discourage hoarding. The Zakat is also prescribed for some kind of income produced by certain assets but there is no Zakat on income earned through personal exertion. Such income has increased exponentially in modern work environments as better educated people are able to produce high returns for their corporate employers. It is high time that these high income earners are obliged to pay Zakat to make them socially and religiously responsible towards their fellow beings.
People in western countries give extra charity, apart from tax, through which some extremely successful charitable bodies provide extra help to the needy. This extra charity can be considered the equivalent of Sadqah in Islam. I feel there is an urgent need for the Islamic institutions to work on this issue and come up with a formulae which helps in creating sufficient funds from Zakat to establish socially just societies in Muslim communities around the world. Muslim institutions should seriously consider applying Zakat to income as well as assets subject to certain tests. People who are asset rich but income poor need to be given some concessions while people who are income rich but asset poor should not be relieved from this very important duty as a responsible member of any community.
From the above it is obvious that these issues need very careful consideration.
This research paper will address all issues related to Zakat in details so that Muslims have a clear understanding of their Zakat obligations. It should also prove that suggested Zakat system assisted by additional Sadaqat will be able to alleviate poverty in Muslim societies around the world.
This subject needs lot of ijtehad (Strive intellectually to comprehend problems) and Ijma (Consensus). The purpose of this research paper is not to merely describe the current understanding of Zakat but to suggest new methods to address modern day challenges within the Islamic frame work.