Economy — 08 September 2011
The Tax We Love to Pay

The month of Ramadan ended this past week, literally hundreds of millions of Muslims fast and spend much time in contemplation and prayer in Mosques globally. Ramadan is the month of revelation (the Quran was first revealed in Ramadan) in which believers will abstain from all food, water and sexual relations during daylight hours. It is also a month of Zakat. All Muslims capable to pay Zakat al Fitr pay it to the poor prior to end of Ramadan (signified with the Eid celebration). The minimum amount is one sa` (approximately four double handfuls) of food, grain or dried fruit for each member of the family. So usually the head of each household will calculate for every member of the house and provide the equivalent in money to the poor – those in relatively wealthy countries arrange for the money to be sent to the most deserving, of which there are many. In the absence of the authority of the Head of an Islamic State Muslims will also often calculate and pay their mainstream Zakat obligations during Ramadan. The non-Fitr form of Zakat is payable on liquid assets (money, gold, investments, etc) and various business assets (including livestock) which amount to more than 85 grams of gold (or its equivalent) held over the course of the year.

Despite the appalling array of despots, tyrants and opportunists that plague the ruling circles in the Muslim world, Muslim compliance in paying Zakat is high, it is an act of worship and as important as any other including prayers, fasting, and the Hajj (pilgrimage). Yet, the absence of Islamic political authority means the collection of Zakat is sporadic and largely dependent on individual honesty. Accordingly we have the inefficient spectre of millions of family, friend and charitable organization networks that collect and distribute the Zakat. And whilst the Quran clearly defines the types of recipients including the poor, destitute, indebted, and travelers; inevitably there are discrepancies over the efficiency and efficacy of these networks. The famine crisis in war torn Somalia is a good example of critical recipients of aid suffering with logistical and political obstacles to zakat getting through.

Bill Gates has also been planning the spending of his wealth this month. The worlds second wealthiest according to Forbes (estimate of $56 billion) via the Bill and Melissa Gates Foundation’s latest project through GAVI (Global Alliance for Vaccines and Immunisation) aims at increasing immunization rates amongst children – a fine objective without doubt.

One of the highest priorities of the Gates Foundation is to increase access to life-saving vaccines for children in the world’s poorest countries.  The reductions in prices offered by developing country and multinational vaccine manufacturers will enable the GAVI Alliance to take a significant step toward ensuring that children living in poor countries have the same access to life-saving vaccines as children living in rich countries.”

Despite the enormous resources that the Gates foundation can bring to philanthropy there are still issues. The Los Angeles Times reported in 2007 and found that hundreds of Gates Foundation investments — totaling at least $8.7 billion, or 41% of its assets — have been in companies that actually countered the foundation’s charitable goals or socially concerned philosophy. With clear failures in areas such as environmental stewardship, human rights and blocking patents. In the healthcare arena large donations can also cause issues. Despotic regimes are only too happy to hide behind large donors by simply reducing domestic budgets to essential healthcare, this leads to a further dependence culture on a source which is not always consistent. Despite the obvious and very generous scale of giving involved one can also justifiably ask whether an IT software mogul is best placed to decide where these enormous fortunes should be best applied, either geographically or by sector (food, housing, healthcare, etc).

I remember being invited to lead a debate at the Oxford Union in April of 2007. Hampered by the failure of the head of the UK Communist party to appear for our team we narrowly lost the debate (arguing for the motion  – “This House regrets the founding of the United States?”) against a team including former assistant secretary of defence of the US – Peter Rodman, BBC US correspondent Matt Frei and American journalist Jonah Goldberg.

I remember well one particular exchange when Goldberg challenged me (UK parliamentary rules including “giving way” are followed) over the scale of philanthropy outside of the US. Goldberg was not aware that I had read an article in one of the papers he writes for (the LA Times) just prior to the debate, in which the author highlighted that American billionaires give on average 1% of their wealth annually in charity. The members of the Oxford Union were quite appreciative when I shot back at Goldberg mentioning this 1% average and that Muslims of all manner of wealth (great and little) give 2.5% of their key capital annually in Zakat.

With 1 in 7 in the world hungry and 1 in 4 in absolute poverty clearly the scale of giving from the “haves” in the world is an issue – are enough giving? And of those that give, are they giving enough? But the efficiency of spending too must be addressed, and it is surely not efficient to rely on ad-hoc family networks or wealthy benefactors – no matter how large the purse. The UN calculates that the whole worlds population basic requirements for food, drinking water, education and healthcare can be covered by a levy of 4% of the accumulated wealth of the largest 225 fortunes, so we are not talking about impossible financial targets to solve these crises. Greater involvement of political leaders in assisting the process or prioritisation of aid/charitable giving and the efficient management is required. However, with “respect” for politicians/rulers at historic lows, both in the Muslim and secular world, there seems little appetite for greater political control and direction.

Although noble that the Gates foundation have set aside hundreds of millions for the cause of vaccinations, basic food and shelter is surely of a higher priority. The Muslim world in this instance must take the lead. Islam defines the basic rights for each and every human as food, shelter and clothing, (It is narrated that Prophet Muhammad said: “The son of Adam has no better right than that he would have a house wherein he may live, a piece of clothe whereby he may hide his nakedness and a piece of bread and some water.”). The imperative implicit in this command obliges the head of an Islamic state to provide these basic necessities for every citizen, and indeed this was successfully applied over millennia but is sadly missing today.

Alas it is also not enough to have a strong and accounted leadership, where is the necessary wealth to be generated from which enables poverty alleviation? Here the Islamic approach diverges dramatically from the secular capitalist approach where a trickle down of wealth is assumed together with a welfare system backstop for the severely disadvantaged. Islam too has a final backstop of the State to ensure that the minimum requirements is met for all, but before that is reached the individual and then family units have obligations to meet minimum sustenance and shelter needs for family members. However, the key difference that runs through Islamic principles of tax and contribution lies in wealth, rather than income taxes. Zakat epitomises this approach. The emphasis upon taxing wealth that is not fully invested encourages full investment and does not discourage higher earnings in the same way that income taxes penalise high earners.

Of course the political and ruling classes in the West (which coincidentally have accumulated vast fortunes) are, surprise, surprise, dead set against wealth taxes, and exercise all pressure to spread the burden far and wide via income and consumption taxes. Whereas Muslims have shown that well defined and limited taxes such as Zakat which are not only limited in scale (2.5% per annum) but also to the recipients, are not a burden but a religious obligation with positive societal ramifications. Hence many Muslims look forward to paying the zakat which goes to the most deserving in society, rather than an anonymous pot to be allocated at the whim of politicians or their backers.

How many can say they love to pay their taxes.


Jamal Harwood is a regular contributor to New Civilisation.  He is a lecturer in Finance, and a member of the UK Executive Committee of Hizb ut-Tahrir Britain.

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