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The Ethics of Tax Evasion in Islam: A Comment

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Abstract

According to Islam, Muslims have a moral obligation to pay zakat for the support of the poor and for the legitimate functions of government. Thus, evading one’s duty to pay zakat is classified as an immoral act. The Islamic system of taxation is a voluntary one, at least partially, although Islamic literature makes it clear that a government is justified in forcing people to pay taxes if the amount raised by zakat is insufficient to cover all the legitimate costs of government. However, this right of interference with the individual’s personal property will be limited to the extent required by the general welfare of the society. Also, it does not follow that Muslims have a moral obligation to pay whatever taxes the government demands and it does not follow that any and all forms of taxation are legitimate. Thus, a case can be made that some forms of tax evasion, under certain conditions, may not be immoral. The author reviews the literature and discusses the circumstances where tax evasion would not be considered unethical under Islam.

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Notes

  1. 1.

    For more on the legitimate role of the government under Islam, see Siddiqi 1996.

  2. 2.

    Since there must not be any income tax, there definitely must not be any graduated income tax, which necessarily treats the rich less favorably than the poor. According to Yusuf (p. 67): “There is no tax on income, which curbs initiative and enterprise. The progressive taxation assumes illegitimacy of the income of the rich. The rising slabs represent taxation with vendetta. Only a proportional tax at a fixed rate (on the pattern of Zakat) is to be levied on the accumulated wealth of the capable taxpayers without any distinction.”

  3. 3.

    A simplified definition of a direct tax is a tax that individuals or corporations pay directly (Stiglitz, 1988: 387). Indirect taxes are taxes on commodities. However, the burden of a corporate income tax is ultimately borne by individuals, either shareholders, consumers, or the corporation’s employees. So a case can be made that a corporate income tax is actually an indirect tax. For more on the distinction between direct and indirect taxes, as well as the ethics of tax evasion in general, see McGee (1994).

  4. 4.

    For examples, see Utt 1991; Payne 1992; Weidenbaum and DeFina 1978; MacDonnell 1989; U.S. General Accounting Office 1993; Gray 1987; Hopkins 1991; Yandle 1994; Adler 1996.

  5. 5.

    For example, see US Trade Representative, 1997 National Trade Estimate Report on FOREIGN TRADE BARRIERS (Washington, DC: Superintendent of Documents).

  6. 6.

    For a study that discusses some regulations that actually make things worse rather than better, see Stroup and Goodman (1989).

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Authors and Affiliations

  1. School of Business, Florida International University, 3000 NE 151 Street, North Miami, FL, 33181, USA

    Robert W. McGee

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Correspondence to Robert W. McGee .

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  1. Florida International University, NE., 151st Street 3000, North Miami, 33181, Florida, USA

    Robert W. McGee

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McGee, R.W. (2012). The Ethics of Tax Evasion in Islam: A Comment. In: McGee, R. (eds) The Ethics of Tax Evasion. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-1287-8_10

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