Zakat: Islam’s missed opportunity to limit predatory taxation

Abstract

One of Islam’s five canonical pillars is a predictable, fixed, and mildly progressive tax system called zakat. It was meant to finance various causes typical of a pre-modern government. Implicit in the entire transfer system was personal property rights as well as constraints on government—two key elements of a liberal order. Those features could have provided the starting point for broadening political liberties under a state with explicitly restricted functions. Instead, just a few decades after the rise of Islam, zakat opened the door to arbitrary political rule and material insecurity. A major reason is that the Quran does not make explicit the underlying principles of governance. It simply outlines the specifics of zakat as they related to conditions in seventh-century Arabia.

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Notes

  1. 1.

    On the Quran’s economic vocabulary and comparative counts of particular usages, see Kuran (2010, pp. 493–494).

  2. 2.

    For example, 2:177, 2:215, 4:8, 9:60, 24:22. “God’s servants” is a translation for fi sabīllilāh, literally “in the cause of Allah”.

  3. 3.

    Leviticus 25:10. For a history, see Zuckermann (1857/1974).

  4. 4.

    For a broader list and variations among schools of law, see Zysow (2002, pp. 410–414). Al-Mawardi (1050/1996, pp. 127–139) provides a medieval account of the diversity in interpretations.

  5. 5.

    Slave labor, too, was used to build such structures.

  6. 6.

    Zakat also has anti-avoidance rules. Transactions undertaken specifically to avoid zakat, such as transferring assets to another person right before the tax is due, do not eliminate the legal duty (Askari et al. 1982, p. 81).

  7. 7.

    Illiteracy can pose a complementary problem. Illiterate persons depend on what literates select to read from the Quran; they cannot browse through it on their own. Even for literate readers, however, understanding the meanings of verses can be challenging. Few modern Arabs understand classical Arabic, the language of the Quran. The challenge is even more serious for non-Arab Muslims, who form three-quarters of the global Muslim population.

  8. 8.

    Verse 2:261 says that “those who give their wealth for the cause of Allah” will reap rewards; and verse 59:9 that “those who preserve themselves from their own greed shall surely prosper.” Neither requires resource sharing. On that basis, a plausible interpretation of these verses is that payment is voluntary.

  9. 9.

    See N.J. Dawood’s introduction to his translation of The Koran (1974, 9–14); and Pearson (1986, pp. 414–419).

  10. 10.

    North and Weingast (1989) provide key insights into the connection between constraints on government takings and government capacity to borrow. For refinements and corrections, see Cox (2012), Stasavage (2002) and Greif and Rubin (2015).

  11. 11.

    Zysow (2002, p. 410); Sabra (2000, p. 40). Up to the 1280s, the state collected zakat dues from the Karimis, a prosperous community of long-distance merchants, and one pastoral community in Libya. Sultan Al-Mansur Qalawun (reigned 1270–1290) abolished even those collections.

  12. 12.

    Bravmann (1963); Schacht (1934, pp. 1202–1204). For the logic of redistribution norms in primitive societies and numerous examples similar to those of early Islam, see Posner (1981, chap. 6; Platteau 2000, chap. 5; Henrich and Henrich 2007; Gaus 2015).

  13. 13.

    Of the 32 Quranic verses that mention zakat, 20 warn believers that punishment awaits those who do not pay. Sixteen of those 20 verses are from the Medina period.

  14. 14.

    Quran 9:34–35. Hoarding is condemned also in chapters that Quran chronologists date to the Meccan period; see 70:15–18, 104:1–4.

  15. 15.

    The verse is 9:60. Its usage of sadaqa came to be interpreted as referring to zakat while maintaining the meaning of voluntary almsgiving in other verses. See Benthall (1999, pp, 29–31).

  16. 16.

    Quran: 9:98. All chronologies of the Quran consider chapter 9 to be among the latest. See Pearson (1986, pp. 414–419).

  17. 17.

    The available historical sources do not allow modern interpreters to identify the evolution of zakat practices with confidence. We do not know the full range of controversies surrounding the drastic re-interpretation that occurred soon after the Prophet’s death.

  18. 18.

    Some examples: Mamluk Cairo, 1315, 12.5% (Lapidus 1969, p. 8); Mamluk Syria and Upper Egypt, 1250–1517, 20–30% (Tsugitaka 2007, pp. 23–24). Iran’s Qajar period, 1785–1925, 10–35% (Floor 1998, pp. 320–327); Ottoman Empire, 1601–1700, 10–40% (Coşgel 2006, p. 338).

  19. 19.

    None of the leading works focusing on the post-1800 period lists zakat in its index. See Issawi (1982), Owen (1993) and Owen and Pamuk (1999).

  20. 20.

    A similar point is made by Rahman (1974, p. 33).

  21. 21.

    As of 2018, for the five most populated countries of the Middle East (Egypt, Iran, Turkey, Iraq, Saudi Arabia), the average number of ministries is 23.

  22. 22.

    In modern times, Twelver Shiis have taken this position. Zakat revenue can be used to cover expenses in the community’s common interest (Tabātabā’i 1983, pp. 25–27).

  23. 23.

    Mattson (2003, p. 39). These jurists included Malik ibn Anas (711–796), Abu Ubayd (770–838), and Ahmad ibn Hanbal (780–855).

  24. 24.

    Løkkegaard (1950), who focuses on Iraq’s early Islamic centuries, stresses this point. His work mentions zakat just seven times, which is consistent with its loss of significance. Six of the references define zakat, or point out that rulers preferred other taxes, or report that believers sought to avoid paying zakat.

  25. 25.

    In a sample of 7724 Istanbul waqf deeds, 2146 name “the poor” (fukarâ) among their initial or subsequent beneficiaries (28.8%), and 1202 name mosque employees or other clerics (15.6%). Moreover, 1399 set aside funds for prayer reading, usually for the soul of the founder (18.1%); typically, those funds accrued to clerics. The deeds in question, catalogued in Aydın et al. (2015), represent about half of the 14,000 waqf deeds that Istanbul courts are thought to have registered from 1600 to the mid-1800s. For complementary evidence, see Hoexter (2003, pp. 150–151) and Ginio (2003, pp. 167–171). Ginio shows that of the 89 new waqfs registered in Salonica between 1694 and 1768, 58 delivered resources directly to clerics; the beneficiaries were “the poor” in 23 cases, with the category defined expansively to include clerics.

  26. 26.

    The patterns in question are observed also in various modern places, for example, Pahlavi Iran (Jabbari 1981), post-colonial Cairo (Sabry 2010), and post-Ottoman Istanbul (Yılmaz 2008).

  27. 27.

    World Bank (2016). In 2013, the World Bank defined extreme poverty as living on less than $1.90 a day.

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Acknowledgements

Gloria Cheung and Dean Dulay provided excellent assistance, and helpful suggestions came from four anonymous referees. For financial support, I am grateful to the Religious Freedom Project of the Berkley Center for Religion, Peace, and World Affairs at Georgetown University. Funding was provided through Georgetown University’s Grant No. CON-005644.

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Kuran, T. Zakat: Islam’s missed opportunity to limit predatory taxation. Public Choice 182, 395–416 (2020). https://doi.org/10.1007/s11127-019-00663-x

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Keywords

  • Zakat
  • Islam
  • Taxation
  • Predation
  • Governance
  • Property rights
  • Poverty

JEL Classification

  • N25
  • N45
  • O43
  • O53
  • K34
  • H13