Taxes, as obligatory levies enforced by the state, must be based on certain principles of common sense, otherwise they cause unrest end disturbance. Scholars and taxation experts throughout the past few centuries have argued over these principles. Adam Smith in the eighteenth century sums up these principles as: the principles of justice, certainty, convenience, and economy.1 This chapter consequently has four sections in which these principles are discussed in relation to both taxes and zakah.

The principle of justice, according to Smith,2 means all citizens of the stats must share in financing the government's expenditures, each according to his ability, i.e. in proportion to his income, which is protected by the state.3 This principle is consistent with Shari'ah in general and with zakah itself, as will be explained in this section.

Justice is a general principle in Islam. It is one of the characters of God, one of His glorious names on which the heavens and earth are based, for the establishment of which God sent messengers and Books. The Qur'an declares in explicit words, "We sent aforetime Our apostles with clear signs, and sent down with them the Book and the Balance (of right and wrong) that people may stand forth in justice."4 This principle of justice is apparent in zakah in the following manner:

1. Equality in obligation Zakah is obligated on each Muslim who owns nisab, regardless of race, color, social status, or sex. The weak and the strong, the noble and the common, the governor and the subjects, the learned and the ignorant. All are equal in the obligation of zakah. This is not the case with taxes, especially in past Western applications when nobles and clergymen were exempt from taxes.5

Ibn Hazm says, "zakah is obligatory on men and women old and young, sane and insane, for God says 'Out of their wealth take sadaqah, so thou might purify and sanctify them'. This covers everyone, for all are in need of the purification and sanctification of God. The Messenger of God (p) told Mu'adh, 'Inform them that God imposes on them a sadaqah, to be taken from the rich among them and rendered to the poor among them.' This text includes every rich Muslim."6

2. Exemption of wealth below nisab The principle of justice in Islam requires that those who own small amounts of wealth be exempted from zakah. Zakah is only imposed on the rich, i.e. those who own at least full nisab. This makes the burden of zakah easier on people. God says, "Take the excess,7 and command what is right,"8 and "They ask thee how much they are to spend.

Say 'what is beyond your needs'."9 Ibn 'Abbas explains "what is beyond your needs" in these verses as the excess of the rich.

3. Elimination of duplicity In application of justice in zakah, the Messenger (p) says, "There must be no duplication in sadaqah."10 Abu 'Ubaid explains, "This means sadaqah must not be collected twice in a year."11 Ibn Qudamdh and others argue that the saying prevents collecting zakah more than once in a year for the same reason of zakatability.12 Using the terms of public finance, this mean duality in taxes must be avoided.

The above-mentioned saying implies several points:

A. Abu Hanifah makes the point that."If an owner sells some livestock, he need not add already-zakted animals to the cash money he owns in calculating its zakah since such addition duplicates zakah on livestock in the same year, which is prevented by the saying."13

B. A person who pays zakah on cash money he owns, then purchases livestock with it, to add to his herd, need not add newly bought livestock, whose value was zakted as money, to the cattle he owns in the calculation of zakah during that same year, because such addition is partial duplication of zakah.14

C. A person who buys livestock in the amount of nisab as trade inventory must pay on this livestock only zakah of business inventory, according to Abu Hanifah, al Thawri, and Ahmad, while Malik and al Shafi'i believe such a person must pay zakah of livestock.15 No scholar argues that on such inventory both zakah on livestock and zakah on trade must be collected, since this is duplication of zakah.

D. The argument given for exempting farm animals used in cultivation is based on the prevention of duplication of zakah. Since such animals work in the production of a zakatable asset (the agricultural produce), imposing zakah on such animals is thus duplication.16 Abu 'Ubaid emphasizes, "If (these animals) work at watering and plowing, the grain that is zakatable includes the value of these animals' work . If one imposes sadaqah on the animals while the grain is also zakted, this makes duplication in the levy."17

E. Hanafites base their argument of exempting kharaji land from 'ushr on the principle of "no duplication in zakah." They say kharji land is taxed on a yearly basis, thus 'ushr and kharaj must not be combined on the same land.18

F. Jurists, in preventing duplication in zakah, argue that nisab must not be exhausted or burdened by debts, since assets that are due to others as debts must be deducted in the calculation of zakah and treated as non-existing from the point of view of zakatability.

Jurists argue that the deduction of loans from zakatable assets is based on the principle of avoiding of duality, since the creditor is required to pay zakah on such loans.19

4. Rates of zakah differ depending on efforts Lower rates apply when the production process requires more human efforts.

Accordingly, the rate of zakah is ten percent on grains and fruits watered by rain or rivers, and five percent when water must be carried mechanically, while the rate on earned income, salaries, and professional income is only 2.5 percent. The system of zakah is almost unique in these variations of rates according to effort spent in production.

5. Consideration of personal circumstances Another important application of the principle of justice is giving attention to the personal circumstances of the zakah payer. zakah does not deal solely with zakatable items detached from the person himself. Taxation specialists distinguish between, what they call "personal taxes" and "physical taxes". Personal taxes take into consideration the following points:

1. Exemption of a minimum standard of living from taxes.

2. Consideration of the source of income in the levy of taxes.

3. Deduction of costs and expenditures related to income.

4. Consideration of family responsibilities.

5. Consideration of debts and loans.

Islam preceded all known taxation systems in providing for personal elements in the obligation, exemption, rates, and deductions in the zakah system. Long before public finance studies recognized any distinction between physical and personal taxes, Islam established the following:

A. The exemption of what is below nisab from zakah. This is founded on the principle that zakah is imposed on the rich for the benefit of the poor; nisab is a minimum level of richness. Only recently have other taxation systems started exempting income beneath a certain minimum from the burden of taxes.20

B. In addition to nisab the cost of a minimum level of living is exempt from zakah.

The provision for living is considered among the basic needs of zakah payer. Jurists defined nisab as that amount (say 200 dirhams of silver) which is in excess of what is needed to satisfy the essential needs of the owner. This was discussed in chapter one of part three of this book, where it was emphasized that zakah is only taken out of excess.

Muslim scholars define excess as what is above the provision needed for satisfying essential needs,21 for the Prophet (p) says, "Sadaqah must only be given out of richness," and "Start (by providing) for those you are responsible for." C. Debts are deducted from taxable assets according to the majority of scholars.

This is supported by the texts and spirit of Shari'ah .22 Hanafites say "Whoever owes debts that exhaust his assets, whether these debts belong to other people or to God (such as past due zakah), is not zakatable. Such a parson needs to pay liabilities due to other people as well as to God, in order to avoid people's demand and the punishment of the hereafter. Not paying due debts hinders him from entering heaven, what need is there more than this? Thus, ridding himself of these responsibilities is to him like water for the thirsty person or clothing for the naked. Such a person must indeed be exempt from zakah."23

D. Production costs and provisions for the payer's living are deducted from zakatable income. 'Ata says regarding zakah on agriculture, "Deduct your expenditures, then pay zakah on the residual. "This is also the view of Ibn 'Umar and Ibn 'Abbas. A similar opinion is reported from Ahmad. In trade, expenditures are also deducted before the calculation of zakah.24

E. Consideration of sources of income in zakah is obvious from the application of different rates according to the different sources of zakatable items. so that 2.5 percent applies on trade income, salaries and professional income; five or ten percent on agriculture, and 20 percent on minerals and buried treasure.

6. Justice in procedures In addition to justice in the levy of zakah itself, collection procedures are also based on justice. The system emphasizes that zakah officers must be selected out of the best, most knowledgeable persons, who must be clearly instructed to be fair in their estimations and calculations of zakah. Abu Yusuf wrote to the khalifah Harun al Rashid "O Prince of Believers, order your ministers to select a person who is honest, trustworthy, wise; whom you can trust and whom people can also trust. Then appoint him to collect the sadaqat. Instruct him to assign only officers who can be trusted, after inspecting their opinions, behavior, and honesty, for the collection of sadaqat in different areas. I have come to know that some of the kharaj commissioners send men to collect zakah who do injustice and arbitrarily oppress people. They take what is not lawful to them. For zakah, you must only appoint the righteous and trustworthy people."25

The Prophet ordered his zakah commissioners to he just and moderate and to observe, to the letter, the rules and instructions of this obligation . He (p) says, "A just worker on sadaqah is like a fighter in the way of God."26 He advised one of his zakah commissioners, "O Abu al Walid, fear God, and do not appear on the Day of Resurrection carrying a camel that shout or a cow that moos or a sheep that bleats out of embezzlement."27

Certainty in taxation means the tax must be well defined in an exclusive manner without ambiguity that leaves room for arbitrary application. Certainty refers to time and procedure of payment in addition to the calculation and definition of the amount that must be paid. Adam Smith believes the principle of certainty is very important, since the taxpayer must know with certainty all his obligations. Certainty, according to Smith, may even be more important than justice itself.

There is no doubt that certainty has much to do with the stability of any tax system.

If the taxpayers become accustomed to the taxes, their rates, and payment procedures, tax payments become easier for them and for the government as well. Because of this, some taxation specialists, like Canard, believe that every old tax is good and every new tax is dubious. Stability of the taxation system, like stability of business law, helps build confidence in the system and its future, and thus in the prosperity of economic activities.28

Undoubtedly , the system of zakah provides a high degree of certainty. Zakah is imposed by God in His eternal Book; no one can add or delete any thing in it. God determines its rates which have been reported to us by God's Messenger, and we have an enormous heritage of jurisprudence that provides explanations and details. All the basic rulings of zakah are fixed and unchangeable by any human effort. Knowing these basic rulings is obligatory for each Muslim as part of the religion of Islam. Zakah is the most stable financial institution humanity has ever known.

Convenience, the third principle of taxation given by Adam Smith, means that the tax and its collection procedures must be made most convenient to taxpayers, so they give the tax with pleasures and satisfaction, or at least without doubt or inconvenience.

A quick glance at Islamic laws and instructions about zakah reveals how much this principle is observed. This is apparent in many occasions:

1. Ahmad reports from 'Abd Allah bin 'Umar that the Messenger (p) said "Sadaqat of Muslims' livestock must be collected at their watering places." in another version reported by Ahmad and Abu Daud, the Prophet (p) said, "There should be no bringing or taking away of zakatable assets. Their due sadaqat must not be collected except in their own locales."29 According to al Khattabi, "No bringing and no taking away" means zakah payers must not be asked to bring their assets to the collector, nor should the payers take their assets away from the collector with the intention of making it difficult for him to pursue the zakatable items. Zakatable items must be counted and zakah estimated in the localities of these assets."30 Al Shawkani adds, "This saying means the collector is the one who travels for zakah collection, since this is easier for payers."31

2. The prophet's instructions ordain taking due zakah out of the average quality of zakatable items and not the best of them. In his instructions to Mu'adh, the Prophet (p)

says, "Avoid the best (quality) of their wealth," since payers usually do not like to give away the best they own. On another occasion, the Messenger (p) was displeased because a collector had taken a high quality she-camel, until the collector explained that he took this she-camel in exchange for two camels of lower quality. The Prophet (p) says "But it (zakah payment) must be of the average of your wealth. God does not ask you for the best, nor does he accept the worst."32

3. The Prophet (p) instructs estimators of zakah on agriculture to be moderate and to estimate on the lower side. He even orders then to make allowances for errors and for fruits used for family and charity. Abu Daud, al Tirmidhi, and al Nasa'i report that the Prophet (p) says, "When you estimate, do not count one-third, if not, do not count one fourth," and "Take it easy in estimation, since orchards may have trees assigned for eating (by family and passers-by) or charity."33 Al Khattabi comments that one-third or one-fourth of the estimated amount of zakatable agricultural product is deducted to make things easier for the zakah payer, especially since a certain proportion is always consumed or lost before the time of harvest. 'Umar bin al Khattab used to instruct his estimators to make such deductions.

The economical principle means collection cots must be minimum. These cots includes what the state pays, such as collectors' salaries and administrative and transportation costs, in addition to what the payers expend to prepare reports and accounts or to process their complaints or objections to the estimated amounts .

Obviously, the purpose of a tax is to bring net income to the state to finance public expenditures. When the principle of economy is not observed, a large portion of proceeds is used to sustain the collection process itself.34

Islam prohibits extravagance and ordains moderation and sometimes thrift. This applies as much to public funds as to individual spending. Rather Islamic law is much keener to economize when using public funds.

It was show earlier how strict the Messenger (p) was about gifts to zakah officers, and economizing collection costs. He was angered by collectors who accepted gifts from payers, and asked them to give these gifts to the public treasury.

Zakah, in principle, must be spent in the same locale it is collected, it economizes transportation coats. We saw earlier how zakah officers went for collection and came back with no residual funds, since they distributed all proceeds in the same area.

Moreover, al Shafi'i requires that no more than one-eighth of zakah proceeds be spent on workers in the zakah administration, in order to restrict administrative costs.