ZAKAT AND PRINCIPLES OF TAXATION: EQUITY, A COMPARATIVE ANALYSIS WITH TAXES

Abstract

Zakat is an efficient mechanism of wealth redistribution, allowing the transfer of wealth from those having excess resources to those in need with the aim of achieving social justice. Thus, at least from this perspective, Zakat can be compared to taxes. Considering Zakat as a form of taxation, this paper attempts to apply the principle of equity and the associated criteria, elements and issues to Zakat. The paper demonstrates that the principle of equity, as envisaged in the context of taxation, is relevant for the purposes of Zakat since the latter: (i) accepts the ability to pay as a criterion for equity, (ii) applies horizontal equity and (iii) embeds a mechanism of self-compliance that tackles avoidance and evasion. The paper also demonstrates that Zakat outperforms taxes as regards the implementation of the principle of equity due to its better ability to address the issues that are generally associated with this principle, including determining and measuring equity, addressing avoidance and evasion and catering for inflation.