A detailed analysis of the economy reveals that the whole economic set-up of our country is based on great vice and evil.

The foremost evil in it is the institution of Banking. Through this institution, the whole nation’s wealth is rendered at the disposal of a few individuals. In the guise of national development and stability, all the money is actually used to satisfy the whims and lusts of a few capitalists. Banking, on the one hand, produces economic disparity and, on the other, cripples the national economy. While the rich get richer and the poor get poorer, a country gets caught in a vicious circle of procuring external loans for its own sustenance. It is because of the institution of banking that a country has to rely on money borrowed on interest from its own people through investment certificates, prize bonds, rifle draws and other alluring schemes for the completion of various welfare and commercial projects and for administration and defence requirements.

The second evil is system of taxation. The government has an almost unlimited authority to impose whatever amount of tax whenever it likes on the people, while the rates of Tax fixed once and for all by Allah and His Prophet (sws) are not taken into consideration. As a result, it has become almost impossible for people to carry out business honestly or pursue any other economic activity. Every year the national budget is anticipated with dread and fear. Every new tax decreases the credibility of the government and represses the spirit of its people to come out and offer what they can if their country is in need of their assistance.

The third evil is that the system does not uphold the rightful claim of the workers to be granted both a basic salary and a share in the net profit according to the extent of toil and labour put in. Although the industrial workers have been granted some other facilities besides their basic salary, yet their share in the total profit has only been accepted half-heartedly. The conditions of the land workers is even more pathetic.

The fourth evil is the total lack of acknowledgement of the fact that every penny over and above a person’s needs does not belong to him; the poor and the destitute are its rightful claimants. As a result, needy citizens have been deprived of this right and the whole system is unable to provide them even with the basic necessities of life.

The fifth evil in is the menace of large cities, which are actually large industrial centres. Instead of dividing the resources of development into small units and providing all the citizens with equal opportunities, these resources have been concentrated in a few areas which receive development at the expense of others. Moreover, these large cities have become perfect breeding places for criminals and have also been responsible for the disruption of our cultural traditions. Not to mention the fact that congestion and pollution have deprived people of fresh and invigorating environment.

These are the major evils which plague our economic set-up. They have, in fact, significantly contributed to the moral degeneration and regression of the whole society. In our estimation, the solution to these problems lies in restructuring the economy of Pakistan on the basis of a just distribution of wealth and self-reliance in such a manner that gradually the government has no need to impose any tax on its citizens other than zakāh. For this objective, the following steps should be taken by the government:

1.  Interest should be totally abolished and the institutional creation of credit should be totally prohibited in the private sector. All banks should be converted into various branches of the Bayt’ul-Māl where people can deposit their savings. These branches should provide protection, exchange, short term loans and other similar facilities. In return for this service, the government should be allowed to invest the deposited funds to establish a broad-based public sector according to the requirements of the country, upon the precondition that without being given any profit on the original amount, a depositor will be returned his money on demand. The industrial enterprises and units so created in the public sector shall be run by the government, and, wherever it is required, the private sector should also be called upon to participate in their running and management by buying a certain quantity of the shares of these enterprises. Alternatively, by imposing Khirāj (tribute) on some of these industrial ventures, the government may entrust their entire management to a party of the private sector just as the Caliph ‘Umar (raa) had done so with the conquered lands of Syria and Iraq which he had kept in state ownership and had entrusted their management to their original owners, imposing a fixed tribute on them according to their produce.

2.  Further domestic or foreign loans should not be taken in future to run the country. The foreign loans, as well as the interest on them, should be repaid by following a certain schedule. Domestic loan should be converted into equity by transforming this loan into units in the National Investment Trust created for this purpose. Alternatively, an option of remaining a creditor may be given to some or all of the domestic lenders to the government.

3.  A National Defence Fund should be announced in which all the citizens of the country should be invited to contribute whatever they can for the defence of their country. A schedule of commitments should be worked out with all those who can donate in this cause.

4.  Every economic venture which leads to moral misconduct in the character of an individual, is a means of deceit or damage for the parties involved, or is a cause of accumulation of wealth in the society should be declared unlawful. Interest, gambling and hoarding should be prohibited, and the law of inheritance should be correctly enforced in matters of all types of wealth and property.

5.  Concerning zakāh, the following aspects must always remain in consideration:

i)     There is no basis in the Qur’ān and Sunnah for the condition of making the recipient the owner of the money given to him (Tamlīk) imposed by our jurists. Therefore just as zakāh can be given in the personal possession of an individual, it can also be spent on projects of public welfare.

ii)    Nothing except the means of production, personal items of daily use and a fixed statutory exemption called nisāb are exempt from zakāh. It shall be levied annually on all sorts of wealth, all types of animals and all forms of production of every Muslim citizen. However, if a need arises, an Islamic State can give a relaxation on any item.

iii)   It should also be borne in mind that according to the various heads mentioned in the Qur’ān, zakāh is not merely for the poor and destitute, but under al-‘āmilīna ‘alayhā, it can be used to pay the salaries of all government officials, under al-mu‘alafatī qulūbuhum, it can be spent to meet all political expenditures in the interest of Islam and the Muslim Ummah, under fī sabīl-Allah, it can be expended on da‘wah ventures and mosques, education and research, Haj and ‘Umrah facilities, Jihād and Qitāl, and other similar projects and ventures of public and religious welfare, under Ibn‘ul-sabīl it can be spent on projects like roads and bridges.

iv)   If the basis of the directive is kept in consideration, all forms of industrial produce, all forms of production based on various skills and all forms of rent on various items or buildings must be classified as produce and not as wealth; therefore, their rates and nisāb should be derived on the basis of the rates and nisāb specified by the Prophet (sws) for land produce.

v)    The rates of zakāh in all forms of production should be fixed on the basis of the principle derived from the Prophet’s directives (sws). According to this principle, zakāh on all items which are produced both by the interaction of labour and capital is 5%; on items which are produced such that the basic factor in producing them is either labour or capital, it is 10% and on items which are produced neither as a result of capital nor labour but are actually a gift of God, it is 20%.

According to the above mentioned principle, the following system of zakāh should be imposed in the country according to the precepts of the Islamic Sharī’ah:

Zakāh on Wealth

This is deducted at the rate of 2½% annually after subtracting the statutory exemption (52.5 tl / 612gm silver or its equivalent or gold or....’) and taking into consideration the exemption of personal items of daily use, for example, personal belongings as house and car. Tax on trade capital should also be levied at the same rate, considering this capital to be the sum of cash and stock in trade.

Zakāh on Produce

Zakāh on produce is deducted on production at the time of produce after subtracting the statutory exemption (1119 kg dates or their equivalent in cash) and taking into consideration the exemption of the means of production, for example, tools and machinery. Depending upon the kinds of items, zakāh has three rates: 5%, 10% and 20%.

5%: On items which are produced by the interaction of both labour and capital. Examples include:

a)    Produce from irrigated lands
b)    Industrial produce from factories
c)    Services provided, for example airways, railways
d)    Income of all private educational institutions.

10%: On items which are produced such that the major factor in producing them is either labour or capital, but not both. Examples include:

a)    An artist’s creation like paintings
b)    The works of scholars and intellectuals
c)    All rented houses and various forms of rental income
d)    Produce from rainy lands.

20%: On items which are produced neither as a result of labour nor capital but are actually a gift of God, for example treasures which are discovered.

Zakāh on Animals

All those animals which are bred and reared for the purpose of trade and business are subject to zakāh. The details of these can be seen in any book of fiqh.

6.  If in the means of production, a person’s right to run and manage what he owns of them results in injustice and usurpation, the state has all the authority to interfere and debar a person from this right, though, only after the decree of a court of law or of the Parliament. For example, all the agricultural lands of the country, by the participation of the government, may be transformed into large mechanised farming units and the planning of their cultivation and harvesting should be done at the national level. A National Land Commission should be duly appointed for this planning. The management of these farms should be entrusted to boards comprising the owners of the land, representatives of workers and the elected representatives of the state. Government should provide seed, machinery and water, while the workers should provide all the effort needed to till and harvest the soil. The income generated from these lands should be distributed among the three parties equally. The workers of course should be given a salary as well.

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