Benjamin Franklin expressed the certainty of tax in our lives by saying: “In this world nothing can be said to be certain, except death and taxes.” Governments claim that they have to tax us in order to pay the army, police, and bureaucrats; to build infrastructure; to operate schools and hospitals; for a number of other purposes. Taxation is the most important source of revenues for modern states. Although states claim that taxation is their right, people still debate the morality and justification of taxation.
We do not pay taxes voluntarily. We are forced to pay taxes. There are some hard questions: how can we minimise the loss of economic welfare due to taxation and how can we minimize the burden of taxation on society? Taxation transfers our wealth from households and businesses to government. But this transfer is not a simple transfer of wealth. It also creates serious problems in regard of human liberty, morality and dignity. Does the government have a moral right to levy and collect taxes from its citizens?
Governments have imposed many types of taxes on human society. In most developed countries, individuals pay income taxes when they earn money, consumption taxes when they spend it, property taxes when they own a home or land, and so on. People are not happy about these taxes and often complain at the prospect of higher taxes.
Taxation affects our behaviour, choices, businesses, savings and spending. Taxation both limits and restricts our economic freedom. We have to limit our economic activities – such as spending, consuming and running a business – according to the amount taken in taxes. Companies fix their investment plans in the light of tax system and those taxes often make it less efficient. It forces businesses to make choices based on what will ease their tax burden rather than on what will make them most productive. Taxes have limited our economic freedom and diminished our wealth and ability to invest.
The real burden of the government is its expenditure. In order to finance its spending, government taxes us. In other words, the burden of government, which is spending, becomes our yoke, which is high taxation. Government must limit its spending, instead of taxing us at high rates, so that our yoke can be a bit more bearable. If government does not limit its spending, high taxation will remain a constant source of suffering in our lives.
1. God, not State, as The Ultimate Owner
In Islam, God has been considered as the real and actual Owner of everything. The Qur'an says, “Whatever is in the heavens and the earth belongs to God” (The Qur’an, 2:284) But God makes the desire for private property as the natural dimension of our nature. It is natural for us to have the wealth of this world. According to the Qur’an, “He has created for you whatever that is in the earth.” (The Qur’an, 2:29) Islam relativizes the ownership of everything and considers only God as the Absolute Owner.
Islam recognises private property and discourages the excessive accumulation of wealth by a minority group in society. In his farewell pilgrimage, the Prophet of Islam said that “O People, just as you regard this month, this day, this city as Sacred, so regard the life and property of every Muslim as a sacred trust. Return the goods entrusted to you to their rightful owners.” Economic freedom and individual labour is highly valued. The state is not the owner of what the individual has. The Prophet said so explicitly in his farewell pilgrimage: “Nothing shall be legitimate to a Muslim, which belongs to a fellow Muslim unless it was given freely and willingly.”
In order to protect human dignity and liberty, the government’s power to tax must be limited. The cost of maintaining an over-sized political establishment is heavy taxation, which is unbearable. Human beings are endowed with natural rights by their very existence. Human rights are an indispensable part of being human and private property is a natural human right. No authority, including the state, should violate this right. What an individual earns only belongs to them. Through taxes, the state says to people that what they own is not their own.
Direct or indirect taxation is an infringement on private property. The government does not care about the right of the citizen to their property. Income, inheritance and other taxes are the denial of private property. The government says to the citizen: “Your earnings do not belong to you; I have a right to own what you own, and my rights come before your rights. I will leave some of your property to you, because I recognise your need, not your right. You should not forget that I am the only authority, which decides the amount of property you can own.” In this approach, the state comes before the individual. People have no right to object to high rates of tax. The state is the only authority and determines the amount which must be paid as tax.
There must be justice, which reflects the will of the Ultimate Owner, behind every economic activity and policy, including taxes. The state cannot claim absolute ownership of our private property. If the state makes such a claim, that is aggression against humanity as well as God. Excessive and unjust taxes could be considered as representative policies, in which the state plays the role of God. The state is only allowed to receive a limited amount of tax, it is not allowed to tax individuals to any extent or in any way. The state is the greatest centre of power. The might of the state does not make the state the author of our rights. The tax system can destroy our right to private property and human dignity. The state has no right to own us or to own our property, because we are the owner of ourselves and our property.
2. Care and Compassion as the Natural Aspects of Human Individual
An individual human cannot live as a selfish, isolated creature. They must care about other humans. Compassion and care makes someone a real human being. Someone without compassion and care cannot be considered a true human individual. The Prophet of Islam makes care and compassion a natural part of being a human as well as being a Muslim. According to the Prophet, helping the needy people is our human responsibility: “The one who goes to sleep satisfied while he knows that his neighbour next to him is hungry does not believe in me.” It is the duty of every individual to help one’s neighbour in a free society. But in a socialist order, individuals do not care about each other, because the only owner of property is the state. Needy people expect help from the state, not from individuals.
Compassion and care is not only an individual responsibility but also a social responsibility. Individual and social responsibilities are united in the following statement of the Prophet: “Any community, whosoever they are, if a person among them became hungry, they will be removed from the protection of God the Blessed, the Supreme.” Without human qualities, namely care and compassion, there is merely a crowd, not a society. Compassion and care is essential to a true society.
Care and compassion must be manifested through voluntary charitable activities. Voluntary charitable acts have been called sadaqah or infaq. The Qur'an commands Muslims to help others voluntarily. There are more verses dealing with voluntary charity than obligatory dues. Everyone is morally obliged to help others according to their means and resources.
“ ...The pious (are) those who...spend (in charity) from whatever We have given to them” (The Qur’an, 2:3)
“The pious people (are) those who spend (benevolently) in good and bad days” (The Qur’an, 3:134)
Wealth and prosperity are valued in Islam, because people can contribute to human society through these means. True charity is the fruit of prosperity. If we had no right to own our private property, we would have no right to give. The denial of private property means the denial of charity. The Prophet says that “The best charity (sadaqah) is that given out of richness.”
Each individual person must use their income to support themselves, their families, their relatives and society. The road starts with the individual and moves to other people. The Prophet defines the road map of human charity as follows:
“Start with yourself when giving charity. If there remains any excess, then to your family. If there remains any excess, then to your relatives. If there remains any excess, then do like this, give to those in front of you and those to your right and those to your left.”
People must satisfy their needs first and then support others. The Qur’an encourages people to spend the excess of their incomes for the benefits of society: “They ask you what they should give: say, ‘Give what you can spare.’”(The Qur’an, 2:219).
Income, which is the fruit of human labour and skills, is very important in Islam. No authority has the right to steal our income from us. It is totally up to us to use our income the way we want to. Through our incomes, we should satisfy our needs and help the needy sections of society. People are encouraged to donate their excess wealth to help other people. There is no income tax in Islam.
In order to help other people through voluntary charitable activities, individual people must be economically self-sufficient, not dependent on the state. The Prophet and the Qur’an do not ask people to pay tax to the state, but rather give their excess wealth as a charitable donation to other people. The state cannot tax people in the name of social justice. It is the task of individuals to realise social justice in society. It is not the task of a nanny government to feed the hungry, care for the sick, built schools, look after the elderly people and so on. It is our job and responsibility as humans.
People produce goods in order to satisfy their desires, needs, and ideals. No one is working in order to pay taxes. Our income belongs to us, not to the state. The income, investments and savings of individuals must be protected against the higher taxation of government.
3. Islam promotes Zakat (almsgiving), not Taxation
There is neither the concept of state, nor a theory of taxation in the Qur’an. The Qur’an does not say anything about paying taxes to the state. There is no such thing as Islamic tax. There is no Islamic foundation for sales taxes on goods and services. Instead, Islam encourages people to help others voluntarily and work very hard. There is no way to mystify or sanctify taxation, because there is nothing sacred about taxation. It is only a policy of the state, which can be immoral, oppressive and inhuman. Imposing taxes on an individual’s property without his or her consent is haram (forbidden) in Islam. The Qur’an writes: “And do not consume one another’s wealth unjustly or send it [in bribery] to the rulers in order that [they might aid] you [to] consume a portion of the wealth of the people in sin, while you know [it is unlawful]’’ (The Qur’an, 2:188).
Although Islam does not promote a particular type of taxation, it requires zakat (almsgiving), which is the third pillar of Islam. Zakat is not a state tax but an individual responsibility towards another individual. Zakat is an act of worship, which purifies individual and social life spiritually as well as materially.
Reducing zakat to a form of tax is the corruption of religion. Zakat and tax cannot be identified with each other. They are two totally different things. Zakat is a type of worship, which is imposed on believers by God. On the other hand, tax is an obligation imposed on citizens by the state. Zakat is essentially a matter between God and individuals, but tax has been primarily a matter between citizens and the state authorities.
Taxation is required in order to cover government expenses. For a long time, governments have imposed taxes to raise revenue only to cover the cost of administration and defence, and in the case of despotic monarchs for the personal benefit of the ruler. Hajjaj-ı Dalim (Hajjaj the Oppressor) is a major symbolic figure in Muslim history renowned for his oppressive tax policies. But today, taxes are no longer levied for defence and administration only, but also for the purpose of furthering social and economic policies of the state. People pay their zakat voluntarily, but people pay their taxes compulsorily. Tax can be spent for any purpose, but zakat cannot. Zakat is meant to be spent for particular objectives, which are mainly provision for the poor; to free debtors from their debt; to free people in bondage; to support travellers; and for the good of the people. The state and zakat must be separated from each other. Unfortunately, many rulers have collected zakat from people as a tax in history. Making zakat as a form of taxation could create disastrous consequences for the freedom and prosperity of human society.
The aim of zakat is not to satisfy the needs of the state, but the needs of people. Spending one’s money for the sake of God is not a tax, but an act of worship and responsibility. The Qur’an says: “Alms are only for the poor and needy, and those who collect them, and those whose hearts are to be reconciled and to free the slaves and the debtors, and for the cause of God, and (for) the wayfarers; a duty imposed by God. God is knower, wise” (The Qur’an, 9:60). The Qur’an does not say anything about the right of the state or Caesar. It does not ask us to give state its due, but asks us to support the needy. The Quranic reference is said to be “and render to kindred their due rights, as (also) to those in want…” (17:26). Furthermore, the Qur’an also prescribes what the charitable donations should be spent on: “They ask thee what they should spend in charity. Say: whatever ye spend that is good, is for parents and kindred and orphans and those in want and for wayfarers. And whatever ye do that is good - Allah knoweth it well” (The Qur’an, 2:215).
Islam protects the rights of the poor through zakat. Although Islam does not make the state responsible for needy people, it makes every wealthy person responsible for the poor. This is the virtue of zakat.
People must know how to help. Islam does not show the state how to help, but commands the wealthy to help others through zakat and charity. Islam encourages personal responsibility, it rejects collective responsibility. People must help the needy people in a personal way, rather than simply remaining passive and allowing the state to take their money and give it to the needy in an impersonal way. If we transfer our responsibility for caring and charity to the state, we will end up with a society of irresponsible, uneducated and cruel peoples. Peace, order, prosperity, liberty and welfare existing in human society are mostly a product of the voluntary activity of individual charity.
Making the state caring and compassionate reduces the field of individual responsibility and virtue while it enlarges the area of irresponsibility and cruelty. Islam asks for people to be free from want. Islam encourages people to make profits, but does not ask people to pay their profits as taxes to state. Taxes make people the beggars of the state. Depending on government to satisfy all our needs elevates the state to the status of the omnipotent deity. The government has nothing of its own to give, for it is not a producer of wealth. We should not forget this basic reality: a government that can give us everything we need, can take everything we have away.
Islam protects individual property and everybody is responsible for themselves. The Qur’an says that “no bearer of burden shall bear the burden of another” (The Qur’an, 53:58). Islam also prohibits overspending (isrâf) which is forbidden, even in charity (The Qur’an, 17:29). So we could conclude that high and unjust taxes are contrary to the spirit of Islam.
4. Taxation as the source of injustice and immorality
The state has no right to impose direct or indirect taxes such as sales taxes, court fees, fees on petitions, sale or registration of a property, buildings and so on. Imposing oppressive taxes is an unjust act, which diminishes human liberty and dignity. The power of the state must be limited in the area of taxation. Any ruler, who imposes unjust taxes, has been rejected by Islam. The Prophet of Islam says that “He, who imposes maks (custom duty) would not enter paradise.”
Higher taxes can be an unbearable burden for the poor and the rich. High taxes can make life harder for everyone. Taking private property through high taxes is inhuman as well as unIslamic. If the state claims that those taxes are the only way to finances its expenditure, this is a demonstration of its economic failure and corruption.
Higher taxation is the original source of corruption. Justice Oliver Wendell Holmes forgets an important fact when he says: “I like paying taxes. With them I buy civilization”. Tax revenues are too often diverted from the state treasury into the bank accounts of rulers and bureaucrats. They spend the money supporting their own interests, not genuine public services. Many politicians have promised lower taxes in order to get people’s votes, but after they have been elected they forget those promises. Those taxes are the source of their power. Tax and corruption are frequently connected.
Rulers who collect unjustified taxes have committed a great injustice, because they have infringed upon property rights. People can and must keep the fruits of their labour, which is the requirement of morality. We need the freedom to keep what we earn. In order to protect our freedom, we need lower taxes.
Although there is no moral and human foundation for taxation, we could consider tax a necessary evil alongside the state. Taxes should be collected only in order to cover the vital expenses of the state. The aim of tax is not to prevent the increase of wealth or increase the revenues of state. The only aim is to fulfil the required tasks of state, such as security, the protection of our borders and enforcing justice. A limited level of taxation could be justified on the basis of practical needs and necessity. People then have the right to know where their taxes have been spent. Higher taxes beyond the absolute needs of the state are unjust, immoral and inhuman.
5. Taxation: Wealth Redistribution or Theft?
Taxation cannot be considered business revenue, since government is not a business. Taxation is not a payment made for services rendered by voluntary agreement. People have been forced to pay taxes. Mostly, we are paying taxes not for government services, the money is used to redistribute income or buy votes.
Frédéric Bastiat describes the legalised form of theft as follows: “See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.” There is no morality in taking someone’s wealth and giving it to another. Such redistribution of wealth is about controlling society, not about helping others. It creates two classes of people, tax payers and tax consumers. Tax is a necessary evil which should be limited to financing the required expenditures of state. It is not the job of the state to distribute wealth in society through taxes.
6. Taxation as the Source of Poverty
The states of poverty or wealth are themselves neither virtues nor vices. But Islam asks people to work more and create more wealth in order to free themselves from begging, weakness and destitution. Higher taxes do not liberate people from poverty nor create more wealth. Instead, they leave people poorer. People who pay high taxes find it harder to pay for their own homes, education and businesses. The pain and suffering created by excessive taxes must not be ignored.
Professor Bilal Sambur, Yıldırım Beyazıt University, Ankara
2020 Commission Report, pp. 88 – 92, Taxpayers Alliance and the Institute of Directors, UK.