The main aim of taxation is to generate revenue for governments to finance essential public expenditure like infrastructure, education and defence besides regular government operations. Taxation laws world-wide are diverse with developed nations collecting revenue through income taxes or direct taxes while developing ones rely significantly on trade taxes/consumption taxes or indirect taxes. Most countries use a mix of direct taxes including corporate tax and indirect taxes including value-added tax and general services tax. Taxes are also used to reduce income inequality, stabilize economy during depression and inflation. Tax rates differ for different income slabs intra and inter-countries due to various types of ruling dispensation at different times with separate mind mindsets and stakes in the economy. Thus tax policies and rates ever go on changing making them different and complex.

The Islamic method of taxation is zakat. It is an Arabic word which means, purification, blessing and growth. In Islam it means purifying one’s soul from greed and selfishness while also purifying one’s lawful wealth from impurity. After faith and prayer, zakat is the third mandatory pillar. It is not merely a tax but an act of worship that engenders social justice and strengthens community bonds as it is an indispensable divine command mentioned over 30 times in the Quran.

It is an Islamic financial obligation that requires every sane and adult Muslim whose wealth in the shape of gold, silver and savings reaches or exceeds a minimum threshold -nisab . A person can, however, pay beyond the minimum obligatory rates and earn Allah’s pleasure. For fixing zakat date too, Muslims are free to choose any lunar month as month of paying zakat in a year. However, they pay it generally in the month of Ramzan in the expectation of higher spiritual rewards.

Taxation laws globally levy tax on income received during a year after allowing some rebates or standard deductions, somewhere, irrespective of whether the after-tax income has sufficed the tax payers’ needs or not. In contrast zakat is taken only on the savings accrued in a year. In zakat system there are no different rates of tax for different income brackets or any surcharge or cess. The canons and rates of taxation are same. Zakat is not levied at higher rates if you earn more. Means of income are not taxable except what they produce. It is a divine taxation system with no discrimination amongst any tax payers. None can complain of injustice. Thus it promotes capital formation, appreciates labour and values your merit. It is the best and the just system as it is rooted in the Divine Book and the rates and threshold are fixed by the Benefactor of the Humanity – the infallible exegetist of the Quran. After all who can be the just policy maker and the best caretaker than the Creator of His creation?

The author is a former Sr. Audit Officer and Consultant in the A.G’s Office Srinagar.

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