At the beginning of the rise of Islam in Mecca, the Muslim community was very small and there was no need to collect taxes. After the conquest of Mecca, the position of the Islamic State was established. The Prophet (peace and blessings of God be upon him) sent tax officials to collect zakat to all the Arab tribes, with the exception of one or two cases. to receive the demands.
Although the collection of land tax was started during the lifetime of the Prophet, peace be upon him, but the amount was very small and only two types of agricultural products were received from a Jewish tribe. Jizya collection also started during the time of the Prophet.
However, this tax was not regulated in terms of the amount, time and method of collection and in a simple and small-scale manner. Despite the simplicity of the financial structure, an important point was the heavy emphasis on monetization of the economy. Arab commercial transactions before Islam were conducted using coins of other nations, mostly Eastern Roman dinars and Iranian dirhams.
The Arabs had their own monetary weighing method, and they weighed these coins according to their method and calculated the value of the money. It means that they are not coins. The weights of gold and silver were called dirhams and dinars respectively. The weight of seven dinars was equal to ten dirhams. The weight of each dinar was equal to 72 barley grains of a certain size.
Since this monetary method did not create any problem for collecting zakat, it was approved by the Prophet, peace be upon him. The Messenger of Allah Subhana wa Ta’ala, may God bless him and grant him peace, tried to create a more accurate monetary unit.
Financial policy tools of Islamic economy
These policies are usually used to finance government expenses, create employment, influence people’s purchasing power and the effective demand of society, as well as distribution and allocation goals. Government revenues in the Islamic system and similar financial resources of the Islamic government are provided in the following ways:
1. Khums of booty
2. Jizya
3. Tribute
4. Zakat
5. Anfal
6. Taxes
7. The price of government services
8. People’s aid
9. Borrowing
10. Other income
Below is a brief description of each one:
Khums literally means one-fifth, and in Sharia terminology, it is a tax equivalent to one-fifth, which the Sharia has determined in some cases. The principle of obligatory khums is one of the essentials of Islam and it is specified in the Quran.
Khums has a similar status to zakat from the point of view of the financial policy tool, even in the traditions and words of jurists, khums is considered as a substitute for zakat, which means that since zakat is not included in the status of Bani Hashim, the holy law made Khums obligatory so that it reaches the consumption of Bani Hashim. And the needs of Bani Hashem are one of its uses. Despite this, there are differences between khums and zakat.
The first financial income that God commanded was the khums of booty, then jizya and kharaj, and the last was zakat, which was more stable than other sources. The Prophet, peace and blessings be upon him, established a financial department to manage revenues.
The members of this office were the brokers and zakat workers, bookkeepers and accountants and all those whose presence was necessary for the management of financial affairs. The finance department expanded step by step according to the growth and diversity of the Islamic government’s income and expenses.
The first action of the Prophet may God bless him and grant him peace, regarding the first booty of the Muslims in Badr, was appointing Abdullah bin Ka’b to collect, preserve and confiscate the property in a specific place and prevent it from being distributed by the Mujahideen, and then the spoils were distributed among the Mujahideen by the Prophet, may God bless him and grant him peace.
It is narrated that the Prophet, may God’s prayers and peace be upon him, made Mu’iqb bin Abi Fatimah the head of the central register of spoils in special offices. He also looted people in charge of the akhmas: because the khums had to be preserved and kept in the Bait al-Mal, and in cases of need, the government would spend it, and the names of Abdullah bin Ka’b and Muhaimah bin Jaz have been mentioned among these people.
In verse 41 of Surah Anfal, the distribution of spoils is specified: «و اعلموا انما غنمتم من شی ء فان لله خمسه و للرسول و لذی القربی و الیتمی و المساکین و ابن السبیل ان کنتم امنتم بالله و ما انزلنا علی عبدنا یوم الفرقان یوم التقی الجمعان و الله علی کل شی ء قدیر O believers, know that whatever you have taken as booty (large or small), give khums of it to God, the Messenger, his relatives, the orphans, the poor, and those who are on the way. Furqan and the day when the two armies of Islam and disbelief faced each other in the Battle of Badr, it was revealed that you have believed and know that God is capable of everything.
jizya (capita tax)
Jizya is a tax that is explicitly mentioned in the Qur’an:
«قاتلوا الذین لا یؤمنون بالله و لا بالیوم الآخر و لا یحرمون ما حرم الله و رسوله و لا یدینون دین الحق من الذین اوتوا الکتاب حتی یعطوا الجزیة عن ید و هم صاغرون O people of faith, fight with anyone from among the people of the book who has not believed in Allah and the Day of Judgment, and does not regard as forbidden what Allah and His Messenger have forbidden, and does not follow the true religion and religion of Islam, until he humbly and humbly submits to Islam give.
Jizya was paid only to adult men who were financially able to pay. The amount of this tax was different according to the ability of people and there is no rate mentioned in the Quran. This tax was for non-Muslims and was equivalent to zakat, which was only collected from Muslims.
Since the amount of Jizya and how to collect it is not determined in Sharia law and is left to the discretion of the ruler, it is possible to apply politics easily through it. These policies can be implemented in the following ways:
1. Deciding on a per capita tax or a tax on their lands and other assets.
2. Changes in the per capita amount or property tax rate in boom-and-bust years.
3. Determining per capita and different rates and applying exemptions according to the ability of people.
4. Determining how to receive jizya (cash or goods) to change the supply and demand of money and other goods.
5. The deadline for receiving taxes and postponing them in recession years and collecting them ahead of time when there is prosperity and the government needs money.
The Prophet, peace and blessings of God be upon him, appointed Sawad bin Ghaziyyah Ansari to be the Kharaj of Khyber for tribute, which was a kind of land tax. While determining the tribute, the assessee had to consider the following elements: the quality of the land, the type of crop harvested and the type of irrigation.
According to Mawardi’s theory, when the amount of tribute was decided based on the above factors: i.e. compatibility with land conditions, the best way to pay tribute is one of the following ways: land tax, cultivated area, share in the harvest.
With the characteristic that we have mentioned for tribute, it can be used as a tool for financial policy in two ways, and considering that the government owns these lands, the ability of this tool is more than jizya. Specifically, the government can reduce the amount of tribute or apply exemptions when it decides on an expansionary policy, and on the contrary, when there is prosperity and abundance, it can increase the amount of rent or its share of the company.
(Zakat, charity tax)
Zakat is a religious-financial duty that Islam has made obligatory. There is a difference of opinion in whether zakat can be used as a tool to implement financial policy. Some people believe that since the rate of zakat and its uses have been determined, it cannot be a tool of financial policy, but a group believes that there are flexible things in zakat that can be used as a tool of financial policy.
These items include
If the basis of zakat, i.e. the property to which zakat is due, has two characteristics, it is possible to make policies by means of it:
A: The generality of the property subject to zakat
B: Wide flexibility of the basis of zakat
In this situation, if the government is aiming for an expansionary policy, it can increase the disposable income of the people by limiting the property that belongs to zakat, as a result, the effective demand in the society will increase, provided that the effect is not neutralized by reducing the amount of government expenses.
Zakat and its collection is regulated by this honorable verse: خذ من اموالهم صدقة تطهرهم و تزکیهم» (.سوره توبه آیه 103) Translation: “O Messenger, you receive alms from the believers in order to purify their souls (from the filth and love of the world) and remind them of good prayers so that your prayers will comfort them that God ( He hears the prayers of the sincere and knows the interests of the believers.
After the enactment of zakat, the financial administration was upgraded to an advanced level in terms of order and distribution of responsibilities: such as alms workers, musadaqeen, jabians, whose duty was to collect zakat from the owners. Al-Kharsun, al-Makhnoon, who estimated its amount and size, and the book and editors of charity property and…
In fact, zakat is a tax that is imposed only on the wealth obtained from investment and capital growth. Therefore, wealth and assets that are used to achieve various goals, including personal expenses, are not subject to this tax.
The second point about zakat is that the Prophet, peace be upon him, determined the amount of zakat based on the number of animals, not based on their monetary value, and when these rates are considered based on the number of animals, it can be seen that they are very systematic.
The third point is that since zakat is imposed on the net worth of individuals (net wealth) at the end of the year, this type of tax is not levied on goods that participate in commercial exchanges. This will reduce transaction costs and encourage the circulation of wealth.
Zakat of underground minerals is also known as rikars, which was not very important in early Islam.
Some people have said based on the permission to pay the price of zakat: it can be used in policy making. Some have also said: by changing the ratio of zakat in cash or non-cash, it is possible to influence the supply or demand of the desired product.
Therefore, the government cannot force people to do this, and therefore it is difficult to make policies in this direction. Despite this, the government can collect exemptions for those who pay their khums or zakat early when necessary. And also, when the taxpayers are in difficulty, he accepts their debt and distributes it among the needy from his own resources.
Anfal
One of the most important sources of government income is the exploitation of natural resources, and since the government in the Islamic system has wide powers over natural resources, these properties can play an important role in the government’s policies.
In narrative sources and jurisprudence books, natural wealth has been mentioned under various titles such as Anfal, Commons, Mobahat, etc.
The source of the legislation of this source of income, whose examples and rulings are discussed in detail in jurisprudence books, is the Holy Quran itself, which clearly considers Anfal as the property of God and His Messenger. Lands that have been naturally developed, as well as lands suitable for forests, pastures for mines and part of the spoils, including examples of anfal, have been in the possession of the Islamic government, and on this basis, a lot of these types of lands have been confiscated by the Holy Prophet, may God bless him and grant him peace.
The lands of Bani Nazir and Fadak can be counted among these properties. In the section of financial policies, it is mentioned that this source of income is one of the important political tools at the disposal of the Islamic State.
Taxes
The extensive authority of the government in the Islamic system requires the allocation of resources to cover its costs. A part of these costs is financed through tax payments.
1. Fixed taxes
These taxes are specified in the Shariah texts and the basis of their rates and uses are determined in the Shariah. These taxes are zakat, khums, kharaj and jizya.
2. Government taxes (non-fixed taxes)
Government taxes are receipts that the Islamic government imposes in a special and temporary situation according to the expediency of Muslims and the Islamic country.
Features of government taxes: These taxes, along with fixed taxes, constitute a significant part of government revenues. According to those who believe that waste of money is capital, not income, and accordingly, these wealth cannot be spent on current affairs of the country.
The only source of income for this type of spending is taxes. Because the income obtained from Anfal should be spent exclusively on infrastructure and construction projects. The remarkable thing about these taxes is that they have high flexibility in terms of the non-fixedness of the tax rate and their uses, and it is one of the most effective financial policy tools, but it needs to be compatible and coordinated with fixed taxes.
Government taxes and financial policy, as mentioned, these taxes are highly flexible in basis, rate, time and method of collection, therefore they are the most important financial policy tool. In most countries of the world, most of such policies are carried out through these taxes.
That is, in a state of stagnation, the government increases the purchasing power of the people for consumption and investment by reducing the tax rate and giving tax exemptions and even paying subsidies, and vice versa in an inflationary situation by increasing the tax rate and expanding the tax base, as well as reducing the exemptions and Subsidies reduce the intensity of inflation.
In general, the policies that the government can implement through government taxes are:
Increasing or decreasing the tax base and rate: This policy is carried out for various purposes, including in order to provide for the government’s expenses and also to carry out the contractionary policy of the government, it can expand the range of taxable goods or raise the tax rates.
On the contrary, when the government aims for an expansionary policy or wants to support the production of certain goods, it can reduce the range of taxable goods or the tax rate or eliminate the tax on some goods. This policy is also possible regarding negative tax i.e. subsidy. With this policy, the government can also pursue the distribution goal, that is, by setting different rates for different income groups and also in different regions of the country, it can balance the income distribution of the society.
Policy-making by changing the time of receiving taxes: In the discussion of khums and zakat, one of the imagined ways to apply tax policy was delaying their receipt during recession and hastening its receipt during prosperity. Applying this policy through government taxes is possible provided that it is based on purity and does not have the restrictions mentioned in the discussion of khums and zakat.
Receiving in cash or non-cash: Another policy that is possible with these taxes is that the government receives the tax in cash or in kind in order to affect the country’s liquidity or to affect the supply and demand of goods.
The price of government services:
In the capitalist economy, the government does not interfere in the activities in which the private sector is willing to invest, and only has the role of providing the basis for the private sector’s activities.
In Islamic economy, in addition to the duty of monitoring and policy making, if necessary, the government can directly take over some activities by using the financial resources at its disposal (Anfal and public wealth), and in this way, it can monitor the fluctuations that occur in the economy.
Reducing or increasing the price of public services and goods provided by the government is a financial policy tool. Of course, the implementation of this policy is dependent on the fact that the price increase does not cause economic pressure on the weaker sections of the society and its decrease does not cause the loss of other producers and their withdrawal from the production scene, while the principle of government tenure is conditional on the efficiency and productivity of the sector No less private.
People’s aid:
In Islamic Sharia, apart from financial obligations such as khums and zakat, other charitable institutions have been designed, the organization of which can solve some of the economic, social and cultural problems of the society, while strengthening the spirit of brotherhood and cooperation among Muslims.
borrowing:
Borrowing, unlike the previous cases that existed at the beginning of Islam, may be boldly considered as one of the rulings that find meaning and meaning based on the requirements and conditions of time and place. Also, borrowing cannot be considered as income, but it is one of the ways of financing the government’s expenses and one of the financial instruments.
Public debt or borrowing is the amount that the government takes from others with the obligation to return the principal and interest. General loans to various credits have divisions such as:
• Internal and external borrowing
• Borrowing from the public and the central bank
• Mandatory and optional borrowing
Term and non-term loans.
Each of these loans has specific economic effects and has a separate discussion from the point of view of Shari’ah.
Undoubtedly, the principle of loan (without interest) is legitimate in Islam, but it is recommended for the lender, and the Messenger of God, may God bless him and grant him peace, has also done this.
Borrowing from the public: This is usually done through the issuance of bonds by the government’s treasury.
In countries whose economy is based on interest, these bonds have a specific interest that is given to the bond holders at the time of their receipt. These bonds have a market price based on their nominal price that is recorded on them when they are issued and sold at that price, which is determined according to the market interest rate and is usually higher than its nominal price.
Issuing these bonds will not increase the amount of money because they are financed through people’s reserves, although the central bank can use them to monitor and control the amount of money after issuing these bonds. It is not allowed to use these bonds for this purpose in order to gain interest.
Another form of these bonds is the use of interest-free loans with charitable intentions. It means that the government should issue bonds with specific amounts and specific receipts to finance its expenses, especially the expenses related to charity and public goods, and make it available to the people and take loans from them. High moral motivations are welcomed and forced loans are only possible if necessary. Of course, the government can provide incentives and tax exemptions for the producers of these bonds.
Other income:
Other incomes were also foreseen by the Sharia to fulfill the expenses of the government, which can be mentioned as expiations, financial crimes, general endowments, offerings, gifts and bequests of wealthy people for the government, etc. It should also be mentioned that in the early days of Islam, a major part of government spending was done voluntarily by the people with the encouragement of the Holy Prophet, peace and blessings be upon him.
