A FRAMEWORK OF ISLAMIC ECONOMICS WITH REFERENCE TO ISLAMIC TAXATION AND ALLOWABLE EXPENDITURES

Abstract

The concept ofIslamic Economics underscores the view that Islam, as a religion dictates atotal way of life. The system of taxation in Islam, which is a prominent partof its economics is said to be divinely designed to arrest poverty in theMuslim community. Zakaat has often been cited as a good example of this systemof taxation. It is generally accepted as an act ordained by God to ensure fairre-distribution of economic resources among the followers of Islam. This paperexamines Islamic economics, and in doing so, it evaluates the meaning of Zakaatwith a view to throwing more light on its uniqueness as an Islamic form oftaxation. It also highlights allowable expenditures for tax purposes that areavailable to business entities, subject to levy of business Zakaat. It comparessuch tax deductions with conventional ones operating in non-Islamic settings,specifically in common law jurisdictions. The article concludes that despiteambiguity surrounding the Islamic taxation especially on issues of tax base,treatment, procedures, interpretation of law, and several others, Islamic taxpolicies are meant to foster plans on development in their entirety and toensure social security with the objective of alleviating poverty in the Muslimcommunity.