What if we did away with taxes?

By now, we’ve all probably seen the viral clip of the left-wing Dutch historian, Rutger Bregman, calling out billionaires during the World Economic Forum at Davos for using sly tactics to minimize tax payments. We also witnessed the Panama Papers scandal that saw numerous public figures and world leaders exposed for illegally stashing their wealth in tax havens to avoid paying taxes.

If we take a step back and ask the question of why governments collect taxes from the population, we understand that it is for the purpose of redistributing it amongst the community or in simple terms: “getting money from the rich and giving it to the poor.”

In the Islamic context, there exists the institution of zakat – one of the 5 pillars of Islam – in which Muslim members of the community that have maintained a certain threshold of wealth for a defined period of time are required to donate a certain amount of their money to a particular category of people mentioned in the Quran.

Apart from zakat, there exists the notion of waqf which is essentially a continuous charity in a sense that the asset that is being ‘waqfed’ must be one that is non-perishable. Therefore, goods such as food are disqualified from being waqf assets as they perish once eaten.

Here we may observe that taxes and zakat have a number of similarities in that they are both fixed in percentage and are obligatory upon certain members of society. Waqf, on the other hand, is a practice that is voluntary i.e. done out of the goodwill of a person or an organization. During earlier times waqf had reached such great heights that in places like the Ottoman Empire it accounted for over 1/3 of the State’s revenue and catered for all kinds of communal projects, including the feeding of mountain animals so as to prevent them from coming down to the cities where people lived. This consequently resulted in the collection of zakat/taxes becoming almost obsolete.

With all the good the institution has brought, one would have to pose the million dollar question: what on earth happened to waqf then? The simple answer is that it was seized by greedy Muslim rulers that later came into power. These tyrants had confiscated waqf establishments to selfishly benefit from the massive contributions they received and revenues they generated. This is one of the factors that had facilitated Western intervention in later years (Elasrag, 2017).

Therefore, looking at the history of the noble institution we come to find out that public participation had played and continues to play a significant role in instilling social impact. In those days people were quicker to respond and contribute to a particular social cause. This is not to say that there are no longer generous individuals or institutions dedicated for such purposes rather it is merely to recognize that crowdfunding was the main source of fundraising during those days as opposed to our current times in which avenues, such as micro-financing and mortgaged-bank loans have overtaken crowdfunding to become the primary means to raise funds.

Therefore, we need to revive the notion that in order for there to be social stability in a country there needs to be less reliance on State taxes and instead more promotion and encouragement of community contribution. This is done by way of highlighting the benefits to all the relevant sectors such that a governments’ need to collect taxes and an individual’s tax burdens are both minimized.

It would be considered the missing block in social impact initiatives as they, on the one hand, encourage members of society to donate to social/waqf causes and, on the other, reduce government deficit which in turn reduces tax rates. This would be done by way of promoting and encouraging institutions, such as waqf, by way of formally legislating tax incentives/rebates for individuals and organizations that contribute to it. With CSR being a requirement for financial corporations, policy makers have the responsibility to ensure that these corporations dedicate their surplus funds to causes that are beneficial, sustainable and long-term.

The revival of such a practice would be a huge win for all three sectors as opposed to the current banking system that has left and continues to leave nations overburdened with debt they aren’t capable of settling. It is evident that, with community participation through waqf contribution, countries will not have to rely as heavily on state taxes. History has proven that waqf can support people in need as well as the economy, and, with platforms like the WAQF Chain which is digitizing waqf management and administration, there is no reason why such contributions can’t benefit countries today.

1)  Al-Tawbah, 9:60