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I would discuss the subject in the context of
Bangladesh and also in general context. Before I discuss the particular
issue that is Public Sector Financing under Islamic framework, I want to
discuss about the Fiscal System in Islam in general. Now, by Fiscal system
we mean two policies. One is the tax regime of the country or the taxation
system of country. The other is the expenditure policy of the country. In
other words, how revenue is realized and how revenue is spent. This is the
matter of discussion under the Fiscal system.
Now, I would mention here that I would discuss about the taxation regime
in the modern time in an Islamic system. Now, it is true that in early
Islam the tax regime was not very big. Initially there was only land tax
or what we call ‘Kharaj’ and there was later, at the time of Omar-Al-Faruque,
custom duty was introduced on imports and exports. So this was a very
simple tax system. There was also revenue from state properly like the
state owned mines or forests. Then there was ‘Zakat’ and ‘Ushr’. But this
was not the part of the general taxation. This was a part of we can say
welfare taxation. The purpose of zakat and ushr is not to meet the general
expenditure of administration or for construction of the roads and
highways. The purpose of zakat and ushr is for poverty alleviation or
eradication and not general purpose. So these were the heads in the
beginning and may be the government was also not very complex at that
time. The administration was small and money realised from these heads was
enough to meet the expenditure of that time.
However, I must mention here that the administration is now very complex
and we require much more revenue. So this came up in the Fiqh literature
or in the juristic literature, wheather the government can tax other then
those which were imposed in the early days of Islam and the consensus is
now that the government can impose any tax that is necessary for the
country for its development. Any body can look into the book of Dr.
Yusuf-al-Qardawi “Fiqhluz Zakat” in Arabic (in Bangali Islamer Zakater
Bidhan) where he has dealt the question at length over a hundred page and
he has concluded that the general consensus is that the state is empowered
to impose whatever taxes are needed. However they have emphasised that
there should not be unjust taxes. The govt. should remember, while taxing,
that there should not be any unjust taxation or such heavy taxation which
people cannot bear. But this is a relative issue, subjective issue. What
is heavy and what is necessary is a mater of judgement for the Govt. and
the Parliament who pass the budget. For this it is my submission that
taxes in Islamic state now will be more or less same. Like any other state
we shall have the custom duties, income taxes, value added taxes (VAT) or
sales tax.
It is not necessary to levy special tax on the non-Muslims. As long as the
non-Muslims pay taxes like Income tax, Customs duties, Value Added Tax,etc.
as token of their obligation and obedience to the state, there is no need
for a special tax only on Non-Muslims. Islamic states of Iran, Pakistan,
Saudi Arabia,do not think it necessary to impose a special tax on
Non-Muslims in particular name.
This is also the view of the great jurist of the current age Dr. Yousuf
Al-Qaradwabi. He mentions that Umar bin Al-Khattab, the 2nd Khalifa of
Islam on the request of the Christians of Banu Taglib dropped 'zizia' and
imposed another tax (as at that time there was no modern tax payable by
all). Dr. Qaradawi wrote, " Real situation of present time is that the
non-Muslims do not want to pay Zizia. No Muslim state is realising this
also. They can pay another tax equal to Zakat. It is not necessary to name
it as Zizia........................ " (Dr. Yousuf Al-Qaradawi, Fiqhuzzakat,
Vol. I, “Zizia” Section.
Hazrat Umar (RA) wanted to realise 'Zizia' from Banu Taglib. Hazrat Numan
Ibn Zuraa (RA) said “Banu Taglib is an Arab tribe, they did not like to
pay Zizia..........”, then Umar imposed another tax ........... Imam Abu
Obaid had written that he (Umar) took from Banu Taglib tax but did not
keep the name of 'Zizia', but kept the name 'Sistanit Sadaqah’...... It
has been mentioned in the tradition that "Allah has planted truth in the
tongue and heart of Umar ........ Imam Abu Ubaid says, it is one of the
most beautiful acts of Umar (Kitabul Amwal). (Dr Monzer Kahf during
discussion on the paper mentioned that Zizia is not revelent in the modern
states as these are not conquered territories rather these states mostly
have been established by the joint struggle of the Muslims and
non-Muslims. Syed Abul-Ala Maududi has also stated in his book "Rasail Wa
Masail" (Vol. IV, page 158, Bangladesh Edition published by Syyed Abul Ala
Maududi, Maududi Research Academy, Moghbazar, Dhaka) in response to a
question on rights of Non-Muslims that Zizia is applicable only in case of
citizens of conquered territories and not applicable to the non-Muslim
citizens of country like Pakistan and Bangladesh).
So the tax regime in an Islamic state will not be very different except
that the Islamic govt. is likely be of honest and public minded people. As
for the expenditure policy which is the other part of the fiscal system,
Islamic state will be more prudent and careful of the rights of the
people. It is an obligation under Islam that the need of all people should
be fulfilled. The state is under an obligation to fulfill the needs of all
people and poverty must be eliminated. So, there will be more emphasis on
elimination of poverty than the current time or there will be more
emphasis in reduction of poverty and also need fulfillment of the needs of
people. The demand of justice is that before you meet the luxuries of the
rich people, you meet the need of all people.
I understand that in a private sector driven economy the production will
be free and the market will be free. But even than the govt. policies like
monetary policies and the fiscal policies and the banking policies will be
full geared to fulfillment of the needs of the people before the luxuries
of the rich are fulfilled. These are the initial comment about the fiscal
system of Islam.
Now coming to the topic, public sector financing under Islamic framework I
would first submit that it will depend on what we mean by public sector
and what will be the size of public sector. If we take the case of
Bangladesh, now i.e. the end of the 2002 and the beginning of 2003, then I
will say that public sector is gradually going to be a small sector. Most
of the industries are in private sector and govt. is gradually withdrawing
from the industry and commercial activity. Recently Adamjee Jute Mill has
been closed and now another dockyard has been closed. I believe that the
public sector enterprises will be gradually sold out or closed down. So
the public sector size will be small in so far as industries and
commercial activities are concerned. But I think public sector size will
be considerable in communication (ports, highways). I believe in the long
run public sector role in education will be less though it is very big
now. But I think education will go to private sector in the long run like
other countries. May be, that govt. scholarship program will increase. But
owning of all schools, colleges and universities is not the appropriate
policy for the government as far as I understand from the scenario of the
last thirty-forty years. In this connection, I would mention that whereas
there are only 15 or 20 govt. sector universities, there are already 40
private universities.
Now, how to finance? Whatever the size of the public sector, how to
finance the expenditure of the public sector? I believe that like any
other country the financing has to be made essentially from the revenues
of the govt., by raising taxes and expanding it wisely. It would not have
any top heavy administration or big administration. It should have a small
size administration so that the revenues are not spent mostly on paying
salaries and the allowances or the facilities of officers and staff. In
any event we have to have, finance from the revenues. Second I believe
that a part of the expenditure has to be met from foreign loan. I am not
for taking too much loan. I believe that the foreign aid is a trap to make
the countries slave. A new imperialism is emerging, new political and
economical imperialism is emerging. One or two countries are trying to
dictate the whole world, because most of the countries are in debt. This
is a new kind of slavery- debt slavery, you can call it. The only way to
get out of it is not to depend on foreign aid or foreign assistance or
loan May be for countries like us it would be difficult in one day but we
should make a policy. Let us eliminate the need for foreign assistance
over ten years. If we reduce every year our foreign aid need by ten
percent, then dependence on foreign aid we can eliminate within ten years.
So this is what is important to achieve, this will require serious
political commitment of the govt. to do it.
So I would say that for the public sector financing, I don’t suggest to
get foreign aid or foreign assistance. We have to depend on revenue. May
be, part of the finance can be done by the high powered money created. We
know every year Central Bank creates new money or what we call high
powered money which is approximately ten percent of the current money. The
Central Bank can give this money free in stead of giving on interest to
the govt. They can take only a service charge from the government. This
money can be used by the govt. in financing the public sector project and
particularly the poverty alleviation program. This can be helped very
seriously if the govt. with the consent of the top ulama of the country
launches a program for zakat collection on a obligatory basis. That is of
course, difficult. But it is possible. At least effort should be made. So
that those who are hard core poor like the widows and disabled without any
financial support or the orphans can be taken care of by the zakat money.
I would like to suggest that govt. can raise Islamic bonds also in Islamic
framework and the money can be used only in partly helping the Islamic
Banks to tide over monitory problem, partly in financing those projects of
the government where it is possible under profit sharing arrangement.
I feel that if the govt. follows prudent policy of avoiding wastes and mis-expenditure,
I don’t find any difficulty in public sector financing under Islamic
framework. |