«INTRODUCTION The Qur’an asserts that zakah is a means of purification and sanctification of Muslims1 It thus, natural that considerable attention ...»
Zakah Estimation in some Muslim Countries
The Qur’an asserts that zakah is a means of purification and sanctification of
Muslims1 It thus, natural that considerable attention is given to zakah throughout the
Muslim world today. theoretically speaking, Muslim economists and writers assign to
zakah an essential role in constructing their Islamic economic theories and ideas. As
one of the five pillars of Islam, zakah is indeed a cornerstone of the Islamic economic system, and “the most important fiscal and distributive mechanism of an Islamic economy”2 Although zakah is not the only fiscal tool, more the sole instrument of public revenues,3 it provides the base of the fiscal system and defines its scope of operation within the general framework of the Islamic economy”, adds Faridi4 In practice, the explanatory memorandum of the zakah act of 1984 in Sudan, considers zakah “the essential pillar of the Islamic economy”5, and the Constitution of Pakistan provides for a “proper organization of zakah” to be secured by the State.6 It must be noted at the outset of this study that I do not aim at discussing the fiqhi opinions and positions for their merits, justification or their worth, nor do, want to select from among them the most suitable or most authenticated opinions. This is not a study of the fiqh or zakah. It is rather an estimation of its potential proceeds.
Therefore, we will site views, opinions and practices, without discussing their merits, only for the purpose of facilitating our estimation tasks.
Several Muslim countries enacted laws of zakah. These include Saudi Arabia (1951), Libya (1971), Jordan (1788), Bahrain 1979, Pakistan (1980), Kuwait (1982) See the Qur’an; 9:103.
F.R. Faridi, “A theory of fiscal policy in an Islamic Sate” in Fiscal Policy and Resource Allocation in Islam, Z. Ahmad, M. Iqbal and M.F. Khan, ed. International Center of Research in Islamic Economics, Jeddah, 1983, p.29.
It is revenue that is earmarked for special categories of recipients.
F.R. Faridi, “Theory of Fiscal Policy in an Islamic State” in Journal of Research in Islamic Economics, Vol. No. 1, 1983.
Explanatory Memorandum of the temporary Ordinance of the act of Zakah and Taxes, 1984, p.2.
and Sudan (1989, 1990), in addition to Yemen Arab Republic whose tradition of zakah practices goes back uninterruptedly to the time of the Prophet Muhammad when he sent Mu’alh Many centuries ago. although, three of these countries (Jordan, Bahrain and Kuwait) provide for only a voluntary collection of zakah, the fact that legislations are launched and governmental organizations are created for the collection and distribution of zakah is in itself a significant indication that several Muslim countries are recognizing the importance of reinstituting zakah as socioeconomic phenomenon.
In this paper, the author intends to estimate the zakah proceeds and to investigate the extent of its potential effects on the economic sphere with direct reference to the economies of a few Muslim countries. While recognizing the importance of the social and religious effects of zakah, their consideration is left outside the scope of this study, simply because certain limits must be imposed on any research in order to make it feasible and within the means of the researcher. Selection of countries to which this study refers is done on the basis of several factors including mainly: availability of information, adoption of zakah laws, diversification of economic activities, economic grouping, and the geographical location. Selection is done only among the IDB member countries.
The plan of this research calls for estimating the potential magnitude of zakah proceeds in each of the studies Muslim countries and analyzing its potential effects on the macro economy and fiscal policy. In each of these estimation and analysis, the bulk of theoretical study represents a background and a base. Thus, the state of the art on the subject is briefly reviewed in the process of deriving definitions of zakah base and applicable rates with no intention of solving any theoretical controversy or inconsistency, but for the purpose of discovering operational definitions of the zakah base and nisab. Lastly, latest available data will be used.
Several difficulties face this kind of study. These come mainly from two major sources: Firstly, the lack of agreement about zakatability, rates to apply and collection procedure of many items of wealth and income. This lack of agreement is manifested Ordinance No. 18 of 1980, State of Pakistan, p.2.
on the theoretical level of research and publications as well as on the practical level of legislation. And secondly, the lack of statistical data relevant to zakah calculation, especially statistical information about distribution of different items of wealth and income.
Consequently, the present study consists of three parts, respectively devoted to defining zakatable items, estimating zakah proceeds in a few Muslim countries and elaborating the effects of collection and distribution of zakah. Problems relate to fitting available data to requirement of estimation of zakah shall be tackled in part two via several assumptions.
DEFINITIONS OF ZAKAH-BASE AND RATESIn this part, our objective is to put together the different definitions of the different kinds of assets and income that are subject to Zakah and their respective rates.
DISCREPANCY BETWEEN FIQHI OPINIONS AND LIVING REALITIESObviously, we have one hand a tremendous number of texts and jurists’ opinion about zakah on livestock, certain agricultural products, silver and gold, and trade merchandise. Roving through these texts and rulings one may lend himself to the feeling that the task of finding operational definitions of what is subject to zakah is an easy one. But the reality is somehow quite different for several reasons among
them are the following:
1. The complexity of production, transaction and distribution processes creates many new items of income and wealth that are not mentioned in those texts and rulings such as rubber in agriculture, buffalo in livestock, different kinds of monetary accounts held by the banking system and other financial intermediaries and the whole industrial and services businesses. It is true that such new items must be dealt with in the light of the authentic texts through the means of derivation that are discussed at length in the courses of jurisprudence axioms and principles know as “Usul al fiqh”. But it is exactly here where one finds a spectrum of opinions which makes it more difficulty to derive operational definitions of what is subject to zakah and what is not.
2. Technological advancement and mechanization, since the industrial revolution
Today, for instance, the industrial production and finance sectors generate more income and uses more wealth to private individuals than animal husbandry and agriculture all over the world including Muslim counties. Thus, now-a-days, individuals engaged in industry, services and finance are usually the richest in terms of both their stock of wealth and their flow of income. Consequently, differences of opinion abut the scope of coverage of zakah over these sectors result in wider differences in potential zakah proceeds.
3. Naturally pastured livestock and main agricultural crops represent the two sectors about which one can rely on clear-cut texts and jurisprudence rulings. In most Muslim countries, these two sectors provide economic employment to a large segment of the population which is mostly the poorest. Recognizing the few exceptions, of which Pakistan’s large land holdings is one, this peculiarity creates a situation in which the poorest classes are unanimously subject to zakah while most of the wealthiest classes remain in the shade as far as zakah is concerned. This certainly lowers the zakah proceeds.
4. Furthermore, the cost of collection of zakah on naturally pastured livestock and main agricultural crops is usually high because of several reasons, namely: vast area, inefficient transportation, lack of accounting procedures, collection in kind and its hazards, poor, or lack of storage facilities, ethical conduct of collectors and payers, etc. In contrast to duties on the richest sectors, especially, finance where accounting records are usually kept in a way that fairly represents the truth, the cost of collection of zakah on agriculture is much higher. This led certain governments to seeking collection in money terms on livestock, while others resort to leaving zakah on livestock to personal direct distribution by the owner and sufficing themselves with collection zakah on the financial and monetary sector.7
5. Progress in economic organization and the event increasing monetorizaiton of national and international economies create high degree of transformability and mobility of wealth. Wealth is today transformable from one kind to another at high speed and minimum cost as compared to the time of the Grand Jurists. This speed was tremendously increase by the information revolution. This creates a gap filled by confusion and hesitation, between contemporary scholars, in regard to the zakah base. While some theoreticians argue that zakah system determinedly favors certain forms of assets and investments either by exempting them from zakah or by The Act No.35 of 1994 in Jordan provides for monetary collection of zakah on livestock. See Muhammad Uqlah, research paper on zakah printed without title in the proceedings of the first Zakah Conference, 1404H, Kuwait, Vol. 1, pp.67-68.
In Pakistan, the Zakah and Ushr Ordinance of 1980 excluded livestock from compulsory collection.
See the mentioned Ordinance, first and second schedules.
lowering the rate applied to them,8 a few writers responded by applying zakah on virtually all new forms of wealth.9 ZAKAH-BASE By zakah-base, we mean all items subject to zakah. But before studying the alternative definitions of zakatable items, three important points must be made clear. These relates to classification, the public sector and the estimation in value.
CLASSIFICATION OF ZAKATABLE ITEMSThe traditional way of classifying these items is to sort them according to the availability of texts (of the Qur’an and Sunnah) and jurists’ agreement. Jurists usually follow this way of sorting, thus livestock comes first because there are several authentic saying providing, sometimes even the minute, details about their zakatability, then come main agricultural crops and fruits, followed by gold and silver and trade merchandise, etc. In his volumetric work on zakah,10 al Qaradawi
maintains this basic classification with a slight amendment. His zakah base is:
livestock, gold and silver, trade inventory, crops and fruits, animal products, minerals, return yielding assets, wages and professional income, and finally lands and shares. This method of sorting zakatable item is very much justified form the fiqh point of view. However, the present study chooses to select a different classification of zakatable items based mainly on the national account system adopted by the U.N. In this proposed classification of zakah-base, we will divide zakatable items into flow and stock. Flow items of the zakah-base are those that appear usually in the gross and net national product accounts. They include, sequentially: agricultural products, livestock products, fishing, forestry, mining and quarrying, manufacturing, construction, electricity and gas, transportation, storage and communication, trade, banking and finance, public administration and finance, "al Zakah Wa Mawarid fi al Iqtisadiyyah al Sudan by Muhammad Hashim, in Majallat al Fikr al Islami No.17, 1989, pp.64-66.
See for example “Some basic Issues of Fiscal Policy in Islamic Economy” by Ausaf Ahmad in Conference Papers, Vol. 1 of the International Conference of Muslim Scholars, pp.37-43.
Yusuf al Qaradawi, Fiqh al Zakah, two volumes, Dar Al Irshad, Beirut, 196.
finance, and services. In each of these sectors, the flow of income is represented by (gross or net) value added in the sector.
Stock items of the zakah-base cover items of capital invested in the above mentioned sectors plus items of the stock of personal wealth that are zakatable.
This kind of classification of the zakah-base is more suitable to the purpose of our study because of several reasons. First and for most, it fits better within the contemporary statistical framework of the Muslim countries, and allows best use of available data. But, in addition to this we have two other strong reason in support of this classification. First, it points out clearly, and in the language and terminology of today’s economic statistic the kind of information that is needed in the field of zakah studies by providing operational definitions that are linked to the state of mind and structure of source of information of contemporary statistics.
Second, this classification shows the inadequacy of the available research about zakah-base in which settled disputes pertain to only one small fraction of the contemporary economy while the major sources of income and forms of wealth remain in the disputed range as far as zakatablility is concerned. This way of classification is hoped to have the way for deepening the study and research on those areas where the focus of todays’ economic activity exists. In the following sections, we will discuss each of the item of zakah-base and attempt to put together their different possible definitions.
ZAKATABILITY OF PUBLIC SECTOR
Jurists argue that Bait al Mal (State’s treasury) is not subject to zakah since it is used for spending on the general interests of all Muslims, thus it is similar, in a way to the proceeds of zakah, themselves11. Examples, usually given of the assets of Bait Al Mal are the proceeds of zakah and Ghana’im. But the role of the sate has naturally changed, and it assumes today an important economic role in production and distribution. State-owned enterprises and corporations participate in every sector of the economy, and every sphere of life, in most Muslim countries, and their zakatability must be given a new thought.
al Qaradawi, ibid, Vol. 1, p.132, and Muhammad Uqlah, Ahkam al Zakah wa al Sadaqah, Maktabat al Risalah al Hadithah, Amman, Jordan, 1982, p.25.