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Zakat and Taxation: Navigating the Complexities of Modern Implementation

Continuing from where I left off.

Given the historical truths about zakat and taxes, can we restore its original form? While the worship aspect is certainly preserved, can we implement the rationale behind public finance management?

My answer is clear: Although this is the ideal, I do not believe it is achievable.

Why?

I cannot see the abolition of a practice that has been ingrained in Muslims for 14 centuries since the era of Caliph Uthman. Yes, basing practices on those of Prophet Muhammad’s time is ideal, but not realistic in today’s context.

So, what do we do? Continuing the current practice is the most sound path until we can implement the ideal. In other words, zakat should be practiced according to jurisprudential data as a means of social solidarity and support.

One might wonder; why not exempt zakatable assets from taxes and not demand zakat on taxed assets? This could potentially resolve the dilemma, right?

In theory, yes. In fact, the Ottoman Empire issued fatwas that addressed this dilemma. For instance, it was stated that “Assets subject to zakat are not subject to tax. Taxes paid on assets do not require zakat. Taxes paid can be considered as zakat.”

This approach could indeed eliminate the zakat-tax dilemma and reintegrate zakat into public finance as in the early days, but only under one condition; state approval and endorsement.

Which of the 57 Muslim countries today would accept this? I do not know. Are there any that do? I know there are none. There is a similar practice in America, where donations to non-profit organizations and charities that are tax-exempt can be deducted from taxes. If only it were possible.

Suppose this was implemented through legal reforms; could this system succeed? Unfortunately, I believe it would not.

Why?

Because of our moral issues. One of our biggest problems in the Islamic world is morality. I believe if such a regulation were in place, we would find hundreds of ways to circumvent the law from morning till night, questioning how we can avoid paying taxes while claiming to have paid zakat. I’m sorry to write this, but this is what I believe. “Our actions are evidence of our future deeds,” let me end this painful chapter with this saying.

We Must Update

As I conclude this four-part series on the relationship between zakat and taxes, I must highlight another point. Today, we are compelled to update at least the answer to “Who is obligated to pay zakat?”

Because the value equivalents of the wealth thresholds set during Prophet Muhammad’s time as of March 2024 are as follows: 85 grams of gold is 190,000 TRY, 595 grams of silver is 15,000 TRY, 40 sheep are 40,000 TRY, 30 cattle are 360,000 TRY, 5 camels are 750,000 TRY, and 660 kg of wheat is 6,000 TRY.

As you see, there’s a huge disparity in prices among these assets. However, their economic values were approximately equal when they were first determined. Over 14 centuries, commercial balances have shifted, causing this disparity.

So, what’s the solution? One approach could be to set the threshold for zakat after excluding necessities and the amount required for sustenance, taking the minimum standard of living as a basis, which is a common view among scholars of zakat jurisprudence. Thus, considering the socio-economic and cultural conditions of today, we can determine such a threshold.

Indeed, in this context, the state-defined thresholds for poverty or destitution for a family of 3-4, if not manipulated, can be helpful. For example, as of January 2024 in Turkey, these figures are – assuming the state does not manipulate them – 15,000 TRY for the poverty line and 52,000 TRY for the destitution line. Starting from here, 52,000 TRY could be set as the minimum threshold for zakat obligation. Alternatively, if the official state figures are not trusted, independent research institutions’ findings can be taken as a basis.

In summary; under current conditions, zakat can and should be practiced as a form of social solidarity, a religious and moral duty.

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AHMET KURUCAN
AHMET KURUCAN
Dr. Ahmet Kurucan is a an author and scholar focusing on Islamic Studies and Law.
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