Zakat: An Effective Instrument for Elimination of Proverty
Zakat or 'Poor Due' is a distribution system devised by the Creator and introduced by His Messengers from the very beginning of the civilization. The prime objective of Zakat is to eradicate poverty by equitable distribution of wealth. Zakat is not a donation rather right of the poor in the wealth of the rich. The latest version of Zakat was revealed through Holy Quran and introduced by Prophet Mohammed (Peace and blessings of Allah be upon him). The outcome of Zakat under Islamic system was observed at the end of the reign of Hazarat Omar bin Abdul Aziz (Allah be pleased with him) in the first Muslim state of Madina when it was difficult to find out a person to pay Zakat.
Over the period with the changes in socioeconomic environment, numerous direct and indirect taxes veiling Zakat were either enforced or adopted in the Muslim dominated countries. Consequently, Zakat has turned from an effective distribution system to an alms distribution festival. Zakat is one of the 'Five Pillars of Islam'. Zakat is 'Fard' (compulsory) for every adult, mentally stable, free, and financially able Muslim male and female. The Quran says that only those who pay Zakat are in the "brotherhood of faith". Zakat is a 2.5% levy on most valuables and savings if their total value is more than a basic minimum known as 'Nisab'. Cash at bank and the release value of bonds, securities and shares in any form are Zakatable if they are purchased as an investment. There is no zakat on dwelling house, household furniture, carpets, car, etc for personal use. The obligation of Zakat is raised after passing of a time span of one lunar year (a lunar year is approximately 355 days) with 'Nisab' money and resources in the control of its owner. The owner of wealth is allowed to deduct any amount of money he or she borrowed from others. Each Muslim calculates his or her own Zakat individually. Zakat is also leviable upon crops, animals and stock in trade.
One of the most important principles of Islam is that Allah (SWT) is the absolute owner of all resources of the world and human being is simply the custodian thereof. Accordingly, a wealthy Muslim requires to pay the dues of the poor from the assets under his/her custody. l Zakat on self known as Zakat-ul Fitr is a per head payment equivalent to the cost of around 2.25 kilograms of the main food of the region (this may be wheat, dates ,rice or grapes, depending on the place) paid during the month of Ramadan by the head of a family for himself and his dependents to the zakat collector (amil).l Zakat on wealth known as Zakat -ul-Mal comprises all other types of zakat, such as on business, on savings, on income, on crops, on livestock, on gold, on minerals, on hidden treasure unearthed, etc.
Zakat is ditributable among the following 8 categories of people:
l Faqir - One who has neither material possessions nor means of livelihood.l
Miskin- One with insufficient means of livelihood to meet basic needs.
l Amil - Workers associated with the collection and distribution of Zakat.
l Muallafathul Quloob- One who converts to Islam. Literally those whose hearts are softened. Some scholars claim this also refers to poor non-muslims who do not have enmity towards Muslims.
l Riqab- One who wants to free himself from bondage or the shackles of slavery.
l Gharmin- One who is in debt (money borrowed to meet basic, halal expenditure)
l Fisabillillah- Literal meaning 'In the way of Allah', but it is used for Jihad.
l Ibnus Sabil- One who is stranded in journey outside his territory.
Zakat encourages honest earning and honest living. Since Zakat is a prayer, payment of the same out of illegal income is not acceptable. Allah (SWT) has clearly pronounced this in the following verse of the holy Qur'an:
'Do not acquire anything wrongfully or on false pretences: do not hoard or bury or amass wealth for its own sake but use it freely for good. Whether for yourself or for your neighbours; and be particularly careful not so waste it for idle purpose, but only so that many fructify for the goods of the people.' 9 (34)
There are provisions for tough punishment in eternity for the non-payment of Zakat:
'On the Day when heat will be produced out of That (wealth) in the fire of hell, and with it will be Branded their foreheads, their flanks, and their backs.`` This is the (treasure) which ye Burried for yourselves: taste ye, Then, the (treasure) ye buried ! 9 (35).
Prophet Mohammad (pbuh) said: "Any owner of gold and silver who does not deliver from them their right, on the Day of Quiyamah (Day of Judgement), (the gold and silver) will be shaped as foils of fire. Then, it will be heated in the fire of Hell; (and) then with it he will be ironed on his side, his forehead, and his back" (narrated by Muslim).
The Governments of all Muslim majority countries are under religious obligation for collection and distribution of Zakat.
Zakat and Income Tax
Income tax is a tax on the income of an individual, association of persons, corporations or other legal entities. Universally, the accounting term income is synonymous to revenue. For better understanding of income one of the best accounting definitions has been quoted herein under from International Accounting Standards:
Payment of income tax is mandatory for all citizens generally with an income in excess of prescribed limit. There are provisions for penalty and punishment for the evasion of income tax.
Income tax is leviable on income whereas Zakat is leviable on surplus assets. There is a strong controversy among Muslims of Bangladesh regarding payment of income tax in a situation Zakat is mandatory as per religion. Since, Islamic sariah has restricted Zakat and its benefits only to 8 categories of beneficiaries, Zakat cannot be utilized to run state wheel and for infrastructure development. Therefore, income tax can not be considered as substitute of Zakat and vise versa.
Those who are paying Zakat are subject to double taxation. There is a provision for contribution to Govt. sponsored Zakat Fund. The provision is restricted to small limit and tax credit is allowed only upto 10% of contribution.
The practice of Zakat in Bangladesh
About 89% of 140 million population of Bangladesh is Muslim. Out of total 125 million Muslims around 62.5 million are below poverty line and therefore they do not pay any Zakat, while majority of the remaining 62.5 million pay Zakat ul Fitre and a small portion thereof pay Zakat ul Mal. Though Zakat is equally leviable upon crops, animals and all agricultural products and livestock most of the farm owners are not even aware of the mandate. There are hundreds of millionaires who practice Islam but most of them are paying symbolic Zakat on the basis of own assumption.
The concept of Zakat has turned very complicated because of the development of multifarious financial instruments and changes in economic system. Many of those who are with religious education and conversant with Zakat know little about economic system while the persons driving the economy of the country take little interest in Zakat. Consequently Muslim populace is with mounting ambiguity about computation and distribution of Zakat. People are rarely paying Zakat as poor due rather alms. The poor and destitute people collect Zakat from door to door. The wealthy people in general pay Zakat annually at the time of holy Ramadan calling the poor and destitute to their door. Death of Zakat seekers by stampede in the race to collect Zakat is happening almost every year.
The Muslim population of Bangladesh with an assets upto 'Nisab' could be categorized under three Groups in respect of their practice and perception of Zakat. The first Group being inclined to religion but due to poor knowledge on state affairs is ignoring taxes with a plea that those are un-Islamic, while the moderate Group with less commitment in religion declining to pay Zakat with an understanding that they are compensating the same paying income tax. In reality these two Groups are using the parallel existence of Zakat and Income Tax as an excuse to avoid sometime both. The 3rd and the smallest Group having love for the country and loyalty to religion have turned into the victim of double taxation. One for state, other for poor; one to avoid mischief of laws, and other to get rid of the fire of the hell.
There is no structured organization in Bangladesh for the collection and distribution of Zakat. The Government has established Zakat Fund long back. In absence of transparency and accountability people are reluctant to contribute their Zakat to this Fund. There are number of private volunteer organizations mostly with orphanages for religious education. Since they are collecting fund utilizing religious sentiment of the people, in maximum cases they are avoiding productive and constructive program for poverty eradication.
The greed to get more and more creates unlimited demand for resources. To satisfy this endless demand generally human being are locked into the race for the accumulation of resources, Resulting from difference in capacity this caused concentration of resources in the hand of few and throws the masses to the poverty.
So far, hundreds of researches were conducted on poverty and different factors have been cited to explain why poverty occurs. However, no single explanation has gained universal acceptance.
Poverty in Bangladesh
Most of the causes of poverty noted in clause 2.01 are prevailing in Bangladesh. Bangladesh has almost half of its 140 million population below the poverty line. It has the highest rate of malnutrition in South Asia and one of the lowest adult literacy rates in the world (WB 1997). About 57 per cent of the adult population is illiterate. There is only one doctor for every 4,903 people and one hospital bed for every 3,473 people (FFYP) 1997). About 80 percent of the country's population live in the rural areas and are dependent, in one way or other, on agriculture. Although the contribution of agriculture to GDP is on decline (32 per cent in 1995-96 from 42 per cent in 1984-85), it continues to play a major role in the economy of Bangladesh as it accounts for nearly 62 per cent of the total domestic employment.
The size of the civilian labour force in Bangladesh is 56 million (in 1995-96) of which 45.8 million are rural and 10.2 million are urban. The number of men that constitutes the labour force is 34.7 million while the number of women is 21.3 million. The number of unemployed population is 1.4 million but of the total employed population, more than one-third is under employed (BBS 1996).
Environmental degradation in Bangladesh has reached an alarming state threatening the prospects of poverty eradication and promotion of sustainable development. The current agricultural practices are causing severe damage to the agro-ecosystem affecting productivity, stability and economy of production as well as human health.
It can be said, therefore, that mass poverty in Bangladesh stems from structural deprivation. It is caused by the interplay of several factors such as unequal distribution of productive assets; inequitable distribution of income; unemployment and under-employment; low level of human resource development; lack of access to public institutions and services; interlocked, imperfect and distorted market operation; patriarchal social system; environmental pollution and degradation; lack of good governance and bypassing the poor in mainstream development projects.
The author is a faculty member of the Institute of Chartered Accountants of Bangladesh for the last 17 years. He can be reached at akhalek@bergerbd.com
