Zakat – the need for new simple rules

There are a number of ways in which the Islamic duty to give money in charity is expressed as a right of the poor over the wealth of the rich. Giving in charity was formalised as a duty under the name of “zakat”.

There are a number of problems trying to derive exact rules based on a long and varied tradition which necessitates a new simple rule set that can have global application.

The general rule of giving in charity is expressed in the Qur’an as:

They ask thee how much they are to spend; Say: “What is beyond your needs.”

Qur’an 2:219

Some rules defining what is subject to zakat is based not on needs but on whether or not the wealth of a person is in use. Clearly we use the possessions that we need, but “use” is a loose definition of “need”. It allows the person with “diamonds on the soles of her shoes” to claim a far bigger need than she actually has.

Some rules refer to early precedents to define what is needed in terms of gold or silver owned. But the amounts used while similar in value at the time are now massively disparate with the silver value being 1/20th the value of the gold amount. These mechanisms may have been a useful standard many years ago, but don’t really make sense today.

To solve these issues we need a simple rule to define the needs of people. To be fair this should be a general global standard to redistribute wealth from those who have more than they need to the various uses of charity prescribed in Islam.

This can be done with the aid of some statistics to work out a cost per person per year to pay for their needs. Firstly, a level of goods and services would be defined as necessary. Then a level could be picked such that most people could have what they need for that cost. It could be picked at another level such that 1/4 of people could buy all they need for the year with that amount. It is a rather arbitrary choice but the median global cost seems to be a good way to define a simple number for a global per person per year wealth you can own free from any formal obligation to pay zakat.

Some rules set out that zakat should be calculated on a specified day each year. However, to ensure that money is not moved around among people with different zakat calculation dates, there should be a rule that all calculations are done for a specific date (and time) annually.

Some rules say that zakat once calculated must be paid immediately. However, zakat if calculated on assets that are not cash – and much of wealth is not cash – may take time to convert into a suitable form. For this reason, it makes sense for the calculation to be made on a date and then for the payments to be made at some point over the following year.

I have put together an example calculator based on such rules which is available at:

In this example, a person is invited to declare how many people are their dependants, and claim a zakat free wealth allowance and then to declare all their assets and debts. Then the calculation gives the zakat due on the zakatable wealth.

One of the basic problems with economics and with taxation is that a basic reality of economics is that the value of property is subjective. This is why trade works, it benefits both parties. So how can an asset value declaration used for a zakat tax be objective? Well it cannot. It must represent the declarer’s subjective value. This subjectivity, however does not mean that they can assign any value to their property and there be no consequences if they undervalue their assets so that no zakat is due. The consequences could and should be significant as the definitive tax mechanism given in Islam. A declaration of assets should be binding in that it represents a declaration of all assets that you have. Anything missing means you have no right to it as a possession and implies that if it is taken from you it is not a theft, undeclared property is not yours. The value of declared property as the value attributed to it by the owner means that if the property is taken off the person by the government, then compensating the owner with their own declared value for that property is a fair and just action. So, for example if someone declares that some land they own is worth £100 rather than £100,000, then the government gains the right to take that land from them and give them £100 in compensation.

So a zakat declaration is in fact an offer to sell any (or all) of the declared assets to the government for their stated values.

This meaning gives a clear incentive to people to not give an inaccurately low declaration of their assets. There is also a cost to overestimating the value of assets you own in order to preventing government seizing them.

How the zakat money collected is spent is another issue. There are many categories specified in Islam. Broadly speaking, they are providing for those in need. In particular, those who have zakat to pay do not deserve to receive zakat. How this is done is a matter of politics to pick priorities and policies. With zakat implemented in this way statistics could be produced to show how many people are paying zakat and how many are not. Policies can then be assessed using such statistics to see which policies of how the money is spent have had more effect taking people out of being in need.