Voluntary and Obligatory Taxes in Islam

Islam wants to prevent the excessive accumulation of wealth in the hands of a few people so the society may not fall into two classes: one overwealthy, while the other is starving. The Holy Qur'an gives the reason for taxing wealth by saying,
"...so that it (the wealth) may not circulate among those who are rich among you." (al-Hashr, 59:7)
To bring about this equality in the economic condition of the people, Islam has introduced various methods. An important method is the transferring of the excess wealth from the fortunate sector of the society to its less fortunate members. This is done on two different levels: on an individual level and on a collective level.
1. Individual Level
Islam encourages Muslims to be mindful of the plight of others by prescribing charity. In Arabic, this is known as Sadaqah and Infaq. There are many verses in the Holy Qur'an which command the Muslims to help others voluntarily. There are more verses dealing with voluntary charity than the obligatory dues. Every one is morally obliged to help others according to his or her own means and resources. There are several levels described in the Holy Qur'an:
First level of charity:
They ask you (O Muhammad) as to what they should spend (in way of charity). Say, "Whatever can be spared (from your wealth after your own expenses)." (al Baqarah, 2:219)
Second level of charity:
(The pious are those who)...spend (in charity) from whatever We have given to them. (al Baqarah 2:3)
Third level of charity:
(The pious people are those) who spend (in charity) when rich or poor… (Ali Imran 3:134)
In all these levels, one must remember to follow the path of moderation, and the Holy Qur'an says,
Let not your hand be shackled to your neck (out of greed), nor outspread it completely open -- otherwise you will sit down blamed and destitute (poor). (Bani Israil, 17:29)
2. On a Collective Level.
The economic equality is guaranteed through the obligatory (Wajib) taxes on the excess wealth of every Muslim. These are taxes like Khums, Zakaat, Fitrah, etc.
In short, Islam aims at eliminating the "need" (Hajat), and elevating the needy people to the level of being "free from want" (Ghani).
KHUMS
Khums is the Fifth branch of Furoo e din and it is Wajib on every Muslim. Khums, in Islamic terminology means one fifth of certain things which a person acquires as wealth and which must be paid as an Islamic Tax.
Allah says in the Holy Qur'an:
"Know that whatever of a thing you acquire (Ghanimat), a fifth of it is for Allah, for the Messenger, for the near relatives, the orphans, the needy and wayfarer." (al Anfal 8:41)
THE HISTORY OF KHUMS:
Khums is one of those things introduces by Abdul Muttalib, the grandfather of our Holy Prophet (S) and continued in Islam.
Acting upon a command of Allah given to him in a dream when he discovered the well of ZamZam, he found in it many valuable things which were buried in it by the progeny if Prophet Ismail (A) when they feared their enemies would usurp the valuables.
When Abdul Muttalib found this buried treasure he took out one fifth (Khums) in the way of Allah and kept the rest. This became a custom in his family and after the Hijrat of Prophet Muhammad (S), this same system was incorporated in Islam.
KHUMS HAS TO BE PAID ON THE FOLLOWING 7 THINGS:
According to the Ahadith of our Imams (A), the items which are eligible for Khums are seven:
1. NET SAVINGS:
From business or any income source. It applies to a Baligh person who has surplus of lawful (according to Shariat) income and has net savings after the necessary expenditures on maintenance of his family. He or she must pay 20% on the net savings. This saving could be from wages, salary, profits, gifts, prizes, etc.
2. LAWFUL WEALTH MIXED WITH UNLAWFUL WEALTH:
If lawful wealth gets mixed with unlawful wealth; and if the exact amount cannot be distinguished, or if the quantity cannot be determined or the true owner cannot be found then it is Ehtiyaate Wajib to take out Khums out of it, with a general intention i.e. a payment of Khums or Mazalim then it will become legal wealth.
Mazalim means to pay charity as a penalty for valuables obtained in an unlawful way and when one is not able to reimburse the owner, either because he does not know the owner or because it is impossible to do that.
3. BURIED TREASURE:
You pay Khums on buried treasure if the property found is in the form of silver or gold. If the treasure found is neither gold or silver than it is obligatory on the basis of precaution to pay Khums.
4. MINERALS:
After having paid the expenses of mining the minerals out, if the value of the minerals exceeds 70 gms of gold, then Khums will have to be paid on the remaining amount.
5. PRECIOUS STONES OBTAINED FROM SEA BY DIVING:
It is Ehtiyaate Wajib to pay Khums on such valuables even if it is of a small amount.
6. WAR BOOTY:
It is Ehtiyaate Wajib to take out Khums on booty (spoils of war) obtained from the war against non Muslims, with the permission of the Imam (A), even in his Ghaibah.
7. LAND PURCHASED:
If land is purchased by a Non muslim (Kafir e Zimmi) from a Muslim, the Muslim will pay Khums (i.e. 20% of the value received by him for the land).
Khums is Wajib on seven items as discussed in the last lesson; but we will discuss Khums on only two items:
The net savings, and
Lawful wealth which is mixed with some illegitimate wealth.
The other five are not generally relevant to most Muslims, and when needed one can refer to the necessary Masail for them.
1. Khums on Net Savings
After the allowable expenses are deducted from the income, what remains at the end of the year or on the annual date set for payment, will be the net savings. You will deduct 20% of this saving as Khums.
The deductible household expenses include food, drink, accommodation, transportation, furniture, marriage expenses, medical expenses, payment of Sadaqah, Haj, Ziyarat, gifts, donations, paying debts, legal penalties, wages of servants, insurance premiums, the amount deducted from your salary for mandatory provident fund or for mandatory pension plan, income tax, etc.
All new items that have not been used (even once) by the end of your Khums year must be counted as your savings.
2. Khums when lawful wealth is mixed with some illegitimate wealth
It is Wajib to pay Khums from a wealth which is mixed with some illegitimate wealth. By "illegitimate" we mean anything that has been acquired by the means not permitted in the Shariah, for example, usury, gambling or liquor business.
By "mixed" we mean that the owner is unable to distinguish the amount or the items which have come to his possession by lawful and legitimate means from those which he has acquired by unlawful means.
If a person cannot distinguish the amount, the item and the owner of the wealth acquired by unlawful means from the
legitimate wealth, then the only way to make his existing properties lawful is to pay Khums from the entire wealth.
If a person knows the amount or the item possessed by unlawful means but does not the owner or owners, then he must give that amount or item to the needy as charity (Sadaqah) on behalf of the unknown owner. However, before giving that amount or item as Sadaqah, it is Ehtiyate Wajib to ask the permission of the Mujtahid.
ITEMS ON WHICH KHUMS IS EXEMPTED
There is no Khums on the amount of one's Dowry (Mahr) i.e. the wealth which the husband agrees to pay his wife at the time of Marriage, and she can demand it at any time.
Khums is not liable on Inheritance. It is Ehtiyate Wajib that when one inherits from the least anticipated person, e.g. a very remote relative from whom one does not expect to inherit, Khums should be paid if any amount remains at the end of the year.
DISTRIBUTION OF KHUMS
The money of Khums has to be divided into two equal parts.
One part, i.e. 1/2 is given to needy Sehme Sadaat (persons from the family of the Holy Prophet (S))
The second part, i.e. 1/2 is given to Sehme Imam, i.e. the Imam of the time. At present in the Ghaibat of the Imam (A) this part of the Khums has to be given to most learned and trustworthy Mujtahid. He is Mujtahid whose taqlid we do. With his permission we use this money for other purposes, like building Mosques, Madressas, etc.
ZAKAAT
In Arabic, the word Zakaat literally means "growth". It also means "purification" as used in the Ayah below:
"Take alms (Sadaqah) from their wealth in order to purify them and cleanse them by it." (at-Tawbah, 9:103)
And in many places Allah mentions Zakaat, immediately after prayer, showing its importance:
"And be steadfast in prayer; practice regular charity;..." (al Baqarah : 2:43)
Zakaat is the Fourth Pillar of Islam. It is a Wealth Tax of 2.5%. There are 2 types of Zakaat. They are:
Zakaat-e-Maal - Zakaat on possessions.
Zakaat-e-Fitra - Zakaat payable on Eid-ul-Fitr.
1. ZAKAAT-E-MAAL
It is Wajib on the following things:
1. Wheat
2. Barley
3. Dates
4. Grapes
5. Gold coins
6. Silver coins
7. Camels
8. Cows
9. Goats
10.Sheep
DISTRIBUTION OF ZAKAT
The Holy Qur'an is very clear in its guidance on this. It says:
"Verily, alms (Sadaqaat) are for the poor and the needy,
and the people employed to administer (the funds),
and those whose hearts are to be won over,
and for freeing of slaves,
and those who are in debt,
and in the way of Allah
and for the wayfarer;
a duty ordained by Allah.
Allah is all-Knowing, all-Wise." (at-Tawbah, 9:60)
Therefore Zakaat-e-Maal can be given to:
Fukara: Those who cannot pay their and their families' expenses for the whole year.
Masakeen: Those whose state is worse than Fukara.
Hamil: One who has been appointed by Imam (A) or Mujtahid-e-A'alam to collect Zakaat.
Rikaab: Helping in freeing a slave.
Those non-Muslims who come to Islam by taking Zakaat or have been helpful to Muslims in war.
Debtors who are unable to pay their debts.
Fi Sabeelillah: In the way of Allah to build Mosques, Madressas, Roads, Bridges, etc.
Ibnus Sabeel: Poor travellers, who are stranded far away from home.
2. ZAKAAT-E-FITRA
On the night of Eid-ul-Fitr, Fitra becomes compulsory on the head of the family who is responsible for the maintenance of the family.
If a guest arrives before sunset on the night of Eid-ul-Fitr then the host has to pay Fitra for the guest, even if the guest is a Kafir.
For a servant, who receives wages but whose food is paid for by the employer, Fitra has to be paid for by the employer.
For a child born before sunset on the night of Eid-ul-Fitr, Fitra has to be paid by the head of the house; however, if the child is born after sunset, then it is Mustahab to pay Fitra.
If a guest or servant leaves the house before sunset then Fitra does not have to be paid; however, if they leave after sunset then Fitra has to be paid.
If anyone dies before sunset then Fitra does not have to be paid.
Fitra for someone who is a boarder in the house does not have to be paid by the head of the family; it is the responsibility of the boarder.
The head of the family who is responsible for paying Fitra should keep the money separate at night with the intention of paying it later. It is better that the money is given away before Eid prayers, but it can be given after the prayers.
FITRA CAN BE GIVEN ON THE FOLLOWING:
1. Grapes
2. Grains - rice, wheat, oats
3. Milk
4. Dates
or the value of the above in money.
The Fitra per person has to be 3 Kgs in weight or its value in money. The money for Fitra can be given to any Organisation who undertake the responsibility of buying the grain and passing it on to the people who are liable for receiving Zakaat.
If you are giving Fitra in the form of grain then you have to ensure that the grain is of good quality and not mixed with dirt.
One person cannot give 3 different kinds of grain as Fitra; however, different forms of Fitra can be given by members of the same family.
FITRA CAN BE GIVEN TO:
1. Anyone who qualifies for Zakaat-e-Maal.
Any Shia Ithna Asheri who is poor; but preference has been
given to:
a. Needy blood relations;
b. Needy neighbours;
c. Needy scholars.
3. It is Wajib to give Fitra to the needy in your hometown first.
It is not necessary to tell that the money given to the needy is of
Fitra.
Note:
Fitra given by a Sayyid can only be given to a Sayyid.
2. Fitra given by a non-Sayyid can only be given to a non-Sayyid.
HOW MUCH SHOULD BE GIVEN:
It should be enough to pay for one year's expenses.
It could be given to buy something for the poor from which they can earn a sure income; like setting up a business or buying a sewing machine.
Reference: ImamReza.net