Towards self-enforcing islamic tax system : an alternative to current approaches

Abstract EN

In this paper an attempt is made to develop an alternative Islamic approach towards self-enforcing direct tax system.

A number of Muslim countries are, at present, economically backward.

Here resource mobilization efforts occupy a prime position.

Taxation is one of the important means of mobilizing resources.

It calls for a selfenforcing tax system which helps not only in raising the required revenue but also minimizes revenue leakage on account of tax evasion.

It is defined as the one where efforts to evade one tax will automatically involve the taxpayer in other tax liabilities so great that evasion is not worthwhile.

The system makes it to pay to be honest about taxes.

Any approach towards a self-enforcing system qualifies itself to be called as the Islamic only when it essentially satisfies two conditions.

First, it is necessary that in the perceived approach zakah should form the core of resource mobilization effort.

Second, in addition to the current secular rules and regulations regarding rates, exemption levels, administration, etc., the approach should also incorporate minimum of the Shariah prescriptions.

On one front of the Islamic approach, as developed in the present paper, zakah occupies a pre-eminent position, on the other front a gross tax on income, an expenditure tax and a withdrawal tax operate to support one another so as to reinforce the system.

This approach makes taxpayers to pay at each and every stage of accretion, consumption and accumulation