Handbook on Islam and Economic Life
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Handbook on Islam and Economic Life

Edited by M. Kabir Hassan and Mervyn K. Lewis

Handbook on Islam and Economic Life is a unique study, one of the first of its kind to consider Islam within a broader economic sphere. Covering a wide breadth of topics and research, it explores how Islam impinges upon and seeks to shape major aspects of economic life including economic organisation, business and management, finance and investment, charity, mutuality and self-help, and government. It concludes by analysing the link between religion and development, the present economic situation in Arab countries and the causes of underdevelopment in Muslim countries.
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Chapter 23: Zakat and the economy

Zafar Iqbal and Mervyn K. Lewis


The topic matter of this chapter falls under the heading of what used to be called ‘public finance’ (Musgrave, 1959) and what would now come under the heading ‘public governance’ (OECD, 1993). At its broadest, public governance is about the use of social norms, rules, institutions and decision-making structures of the state to allocate, coordinate or control activity in a society (Bell, 2002). From the viewpoint of the public sector, it embraces issues such as what is the desirable provision of collective goods and services and the system of revenue raising, and what institutional processes ensure that such efficient provision of public goods and revenues is consistent with conceptions of justice resulting from the sociopolitical and moral framework within which a society operates (Dhonte and Kapur, 1997). It is against this general backdrop that we consider zakat and the integrity of the taxation system in an Islamic context. The importance of taxation for governance of the economy is obvious enough. Quite clearly, public finance and public governance depend on taxation revenues for financial resources when providing collective goods and services. At the same time, how governments tax – the nature and forms of revenue raising – does matter for the quality of life and the nature of society (Moore, 2007). Accordingly, the traditional Islamic schema of taxation is examined both with respect to its standing in light of shari’ah and with respect to the needs of society.

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