Taxman

At first, he wanted to make a joke, but it turned into a serious talk. Here's the story.

After saying salaam, the old eagle began by singing,

Let me tell you how it will be

There's one for you, nineteen for me

'Cause I'm the taxman

Yeah, I'm the taxman

Should five percent appear too small?

Be thankful I don't take it all

'Cause I'm the taxman

Yeah, I'm the taxman

If you drive a car, I'll tax the street

If you try to sit, I'll tax your seat

If you get too cold, I'll tax the heat

If you take a walk, I'll tax your feet

'Cause I'm the taxman

Yeah, I'm the taxman

Don't ask me what I want it for

If you don't want to pay some more

'Cause I'm the taxman

Yeah, I'm the taxman

Now my advice for those who die

Declare the pennies on your eyes

'Cause I'm the taxman

Yeah, I'm the taxman

And you're working for no one but me *)

The old eagle meant to tell a light story, so that the birds would, at least, smile, so he began to tell a story, "In the days of the Seljuk Empire, there was a man, named Nasreddin Hodja, he was considered a philosopher, Sufi, and wise man.

One day, the local government demanded that Nasreddin pay the five thousand dollars worth of back taxes. But after selling off his possessions and applying the proceeds towards his debt, he was still short two thousand dollars.

The mayor called for him and told him to pay the remaining money.

“I don’t have any more money,” said Nasreddin. “All my wife and I have left is three thousand dollars-but that is hers.”

“Well,” replied the mayor, “under our law, a husband and wife share both property and debts-and thus, you must use her three thousand dollars to pay of your debt.”

“But I still cannot do that,” replied Nasreddin.

“Why not?” asked the mayor.

“Because,” Nasreddin explained, “The three thousand dollars is actually the dowry that I owe her and have not yet paid her.”

The old eagle paused, waiting. However, none of them were, at least, smiling. The old eagle looked around, the birds, seriously, were staring at him.

Clearing his throat, the old eagle said, "Well, here is another story, 'The tax collector in Nasredin’s town was corrupt and accepted many bribes. One day, the mayor asked the tax collector to present his records for examination.

Upon studying them and realizing that they were falsified, the mayor, infuriated with rage, shouted to the tax collector, “Not only are you fired, I also order you to eat these papers you have presented me while we all watch!”

So he did as he was ordered, while the court attendants watched in amazement as he ate all the paper. Soon the news of what had happened spread throughout the town.

About a week later, the mayor appointed Nasreddin as the town’s new tax collector. When the mayor asked him to present his records the next week, Nasreddin handed him noon-eh-lavash (flat bread) with the records written on them.

The mayor asked, “Why did you write your records on noon-eh-lavash?

“Well,” Nasreddin replied, “I saw what happened to the other guy, so I wrote these on bread just in case you would make me eat them as well.”

For the second time, the old eagle waited, saying, "Any response?" The birds were still silent, untill the bulbul asked, "Is it the story about taxes?" The old eagle replied, "That's right!" Bulbul asked, "How was the tax treatment in Islamic history? Tell us brother!"

The old eagle said, "O my brothers and sisters! Allah Subhanahu wa Ta'ala has revealed a comprehensive economic system that details all aspects of economic life, including government revenues and taxation. In origin, the permanent sources of revenue for the Bait ul-Mal (State Treasury) should be sufficient to cover the obligatory expenditure of the State. These revenues that Shari’a has defined are, Fa’i, Jizya, Kharaj, Ushur, and income from Public properties.

The financial burdens placed on modern states today are far higher than in previous times. When the Caliphate is re-established, it will need to finance a huge re-development and industrial programme to reverse centuries of decline, and bring the Muslim world fully into the 21st century. Because of this, the Bait ul-Mal’s permanent sources of revenue may be insufficient to cover all the needs and interests the Caliphate is obliged to spend upon. In such a situation where the Bait ul-Mal’s revenues are insufficient to meet the Caliphate’s budgetary requirements, the Islamic obligation transfers from the Bait ul-Mal to the Muslims as a whole. This is because Allah has obliged the Muslims to spend on these needs and interests, and their failure to spend on them will lead to the harming of Muslims. Allah obliged the State and the Ummah to remove any harm from the Muslims.

A hasan hadeeth related by Ibn Majah, ad-Daraqutnee and others as a musnad hadeeth that the Prophet (ﷺ) said,

لَا ضَرَرَ وَلَا ضِرَارَ

"There should be neither harming (darar) nor reciprocating harm (dirar)."

Therefore, Allah has obliged the State to collect money from the Muslims in order to cover its obligatory expenditure. The State achieves this by imposing taxes upon the Muslims such that these needs and interests are met without being exceeded. These taxes should only be taken from people’s surplus wealth. This wealth is what is left after someone has spent on his basic needs, and also his luxuries according to the normal standard of living.

There are six areas of expenditure the Bait ul-Mal is obliged to spend upon. If insufficient funds are available then taxes will be imposed upon the Muslims to meet the expenditure. These areas are, firstly, the expenditure upon Jihad and what is necessary for it. The State is obliged to establish powerful and highly trained armed forces. These armed forces must be prepared with the latest and most sophisticated weapons such that their quality and quantity deter, subdue and frighten the enemy. These forces will liberate our lands from occupation, and assist the country in spreading peace and da'wah. Expenditure on Jihad and what is necessary for it is one of the rights due upon the Bait ul-Mal whether there are funds in the Bait ul-Mal or not. If there are funds available, then they are spent on Jihad and its requirements. If there are no funds, then the duty of spending on Jihad, as long as Jihad is obligatory and designated, transfers from the Bait ul-Mal to the Muslims, since Jihad is obligatory upon Muslims by wealth and person.

In the situation where there are no funds in the Bait ul-Mal to spend on Jihad and its requirements, the State must encourage Muslims to contribute voluntarily to Jihad. If the voluntary contributions of the Muslims are insufficient to cover the designated Jihad, then the State will impose taxes upon Muslims up to the amount necessary and no more, to cover the expenditure. It is not allowed for the State to tax more than is required.

Secondly, expenditure on military industries. The state is obliged to establish military and other associated industries to enable the manufacturing of the latest and most sophisticated weapons and equipment for the armed forces. This is because Jihad requires an army, and the army requires weapons so that it can fight. Building highly effective and powerful weapons requires manufacturing. Therefore the military weapons industry has a close relationship with Jihad.

For the State to be in full control of her affairs, and free from the influence and control of other states, she must undertake the production and development of her own weapons especially its vital weapons. This is so that the State has the most modern and developed weapons, irrespective of how much weapons develop and advance. Also the State must have under her control all that she requires of weapons to scare every enemy whether open or hidden, according to the State’s international position.

The absence of these military factories in the Ummah, makes Muslims dependent upon Kafir states for armament, a matter which may make the Muslims political will and decision making subject to the will and decisions of the Kuffar. These Kafir states do not sell weapons except with conditions attached that fulfil their interests, and this would inflict the most terrible harm upon the Ummah.

It is permissible for individuals within the Ummah to establish all or some of these industries to manufacture the necessary weapons. If however, they do not establish them, or they only establish some of them, then the State is obliged to build factories necessary to produce all the weapons and equipment the armed forces need.

Building these factories is one of the obligatory rights upon Bait ul-Mal, whether there are funds in it or not. If funds are present, then they are spent to build these factories. If there are no funds available then the financial obligation transfers to the Ummah. In this case the state introduces a tax in order to raise the necessary funds, irrespective of the amount.

Thirdly, spending on the poor, needy and wayfarers. This is an obligation whether there are funds in the Bait ul-Mal or not. The expenditure is from the Bait ul-Mal, when there are sufficient funds. If there are no funds in the Bait ul-Mal then the obligation transfers to the Muslims. This is because spending upon the poor, needy and wayfarers has been obliged by Allah upon the Muslims in the form of Zakat and Sadaqah.

Therefore, if there are funds available in the Bait ul-Mal to spend on the poor, needy and wayfarers then they are spent on them. If not, the obligation is transferred to the Muslims and the State raises taxes for this purpose such that the required amount of funding is raised.

Fourthly, expenses due in the form of services and caring of the Ummah. These expenses are spent on utilities whose existence is considered a necessity such that in their absence harm would result to the Ummah. These utilities could include: public roads, schools, universities, hospitals, mosques, water supplies and similar services.

The right of spending upon these matters is considered obligatory whether or not there are funds in the Bait ul-Mal. If there are funds in the Bait ul-Mal then they are used to establish these utilities. If not, then the obligation to spend upon them is transferred to the Muslims. This is because spending upon them is obligatory upon Muslims, since failure to establish them will result in harm to the Ummah. Harm must be removed both by the State and the Ummah.

However, if the absence of services offered by the State does not harm the Ummah, then it is not obliged to provide them. An example is the opening of a second road or refurbishing it when there is another suitable road available that can meet people’s needs, or building a school, university or hospital when there are others available, or widening streets that don’t necessarily need to be widened. Another example is the establishment of projects where failure to do so does not result in harm to the Ummah, like mining nickel or building a shipyard to build commercial ships. The State undertakes all these matters only when there are surplus funds in the Bait ul-Mal. If there are no funds in the Bait ul-Mal, then the State does not undertake them nor is it permitted to impose taxes for them. This is because Muslims are not harmed by their absence, therefore establishing them is not obligatory. This is in contrast to the expenditure on services and utilities where the failure to spend on them results in harm to the Ummah. If there are funds in the Bait ul-Mal, they are spent upon establishing and providing the necessary utilities, if not, the State imposes taxes to raise the necessary amount provide these utilities.

Fifthly, expenditure upon emergencies like famines, earthquakes, floods and enemy attacks. The right of spending on these matters is not linked to the presence of funds in the Bait ulMal. Such spending is obligatory irrespective of whether there are funds in the Bait ul-Mal or not. If there are funds in the Bait ul-Mal, then they must be spent immediately whenever these emergencies occur. If there are no funds, then it becomes obligatory upon the Muslims, and the funds have to be collected from them immediately and without delay. If harm is feared due to any delay, then the State borrows the amount necessary to spend upon these emergencies and then pays back what it borrowed from the money it collected from the Muslims."

Bulbul asked, "What about Wealth Tax?" The old eagle remarked, "Taxes are levied on the wealth of the Muslims which is in excess of their basic needs and their luxuries according to normal standards of living. Taxes are only collected from those who have surplus wealth and nothing is taken from those who have no surplus wealth. This is because the Messenger of Allah (ﷺ) said, “The best Sadaqah is that given out of richness.” The richness here means what the person can afford after satisfying his needs.

The Prophet (ﷺ) also said, “Start with yourself when giving Sadaqah. If there remains any excess, then to your family. If there remains any excess, then to your relatives. If there remains any excess, then do like this, give those in front of you and those to your right and those to your left.” [Muslim]

He (ﷺ) deferred the obligation of spending upon anyone else until after spending upon oneself. Taxes are similar to this are as they are like financial maintenance and Sadaqah. Allah says,

وَ یَسۡـَٔلُوۡنَکَ مَا ذَا یُنۡفِقُوۡنَ ۬ؕ قُلِ الۡعَفۡوَؕ

"... And they ask you what they should spend. Say, "The excess [beyond needs] ...." [QS. Al-Baqarah (2):219]

In other words, spending which causes no hardship and which is extra to one’s needs. There is no concept of income tax in Islam as we find in western capitalist countries. Taxes are only levied on excess wealth and not on income. The State is also not allowed to impose indirect taxes such as sales taxes on goods and services. Nor can it impose taxes in the form of court fees, fees on petitions forwarded to the State, sale or registration of land, buildings or measurements or other types of taxes other than those in the shar’iah. This is because imposing oppressive or illegal taxation is one of the prohibited injustices about which the Messenger of Allah (ﷺ) said, “He who imposes maks (custom duty) would not enter paradise.” [Ad-Darimi, Ahmed and Abu ‘Ubayd]

Taxes in Islam are only collected to raise the amount necessary to cover the deficit in the obligatory expenditure of the Bait ul-Mal. When imposing taxation, no consideration is given to the notion of preventing the increase of wealth, or preventing richness or increasing the revenues of the Bait ul-Mal. Consideration is only given to fulfilling the required expenditure on the obligatory needs and interests on the State. If any taxes are taken over and above the obligatory expenditure then this is considered a mazlama (injustice). The Court of Unjust Acts (mahkamat ul-mazalim) has the power to investigate any excessive taxation. If after the court’s investigation the tax or tax-rate is deemed to indeed be a mazlama then the court can oblige the State to abolish or lower the tax and return any excess money to the Muslims. Therefore, the shar’iah has resolved the problem of financing the expenditure on the Ummah’s needs and interests in the modern age.

Islam has a completely different perspective on the economy and tax as the Islamic basis is different to that of capitalism. Fundamentally, taxation in Islam and under the khilafah puts the emphasis of taxation on wealth rather than income. The Islamic taxation system does not tax income, but taxes wealth. This means that the average person will be left with more disposable income and will be liable for tax on whatever wealth is left at the end of the year. And Allah knows best.

And in closing, listen to this story, "A man was caught in a river current and hanging on to some rocks in order to avoid being carried away.

Nasreddin and a friend noticed him, and the friend went up to him, extended his arm, and said, “Give me your hand so I can help you out.” The man, however, did not cooperate.

Nasreddin then asked the man what he did for a living. “I collect taxes,” the man replied.

“Then take my hand,” Nasrudin said, upon which the man finally cooperated.

Nasreddin then turned to his friend and remarked, “Tax collectors speak the language of take, not the language of give.”

References :
- Alpay Kabacali, Nasreddin Hodja, u.cs.biu.ac.il
- Abdul Qadeem Zalloom, Funds in the Khilafah State, Amazon
*) "Taxman" written by George Harrison

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