A Few Quick Questions About Zakat
I did my other readings and found out that Zakat percentage comes from Hadith; not authentic Sunnah. So, although Zakat is Farz, the amount can’t be Farz. Traditionally and mostly agreed amount is 2.5% on extra wealth. Beyond this there is lot of controversy.
The following might be crazy thoughts or suggestions for some, but there is no restriction on thinking. There are many issues with current Zakat recommendations so it seems like the Ijtihad needs a fresh review. It seems like the only consensus is a little more than 2.5% Zakat and the rest is open to interpretation, discussion and Ijtihad. The current Zakat recommendations have many issues. 1. Problem: If Zakat can be offset by taxes to the government, then most people in developed countries pay high enough taxes that they don’t owe any Zakat. Thus, it eliminate the social safety net of Zakat for poor. Also mostly Zakat money is misused or worse, illegally diverted by government officials for personal use. Quran names Zakat as charity and a charity is supposed to go to poor; not for government spending. Solution: Zakat should not be offset by taxes. Taxes are to run the government or a country; not always to solve poverty and related social issues. Zakat should be assessed on net income after taxes. Zakat should be distributed to poor personally or distributed through a trustworthy institution. 2. Problem: The determination of Nisab is either complicated or inaccurate. The cost of living varies by country, city, neighborhood and even circumstances. A single standard doesn’t suit diverse situation. Currently poor are exempt from the obligation of Zakat. Furthermore, determination of poor seems to be subjective, vague or unfair. The current recommendation sometimes stops Zakat funds from trickling down to the poorest of the poor as those slightly better off can take Zakat first. Solution: Zakat should be an obligation on all regardless of income. Those who are not at the bottom of poverty should pay Zakat to the one’s worse than them. This cycle should continue until funds reach the poorest of the poor who are struggling for food. Zakat should go to those struggling to pay for essentials of life in the order of priority…food, clothing, health, shelter, source of income/education, marriage. So, for example, if someone is struggling to save funds for marriage receives Zakat, such person should also pay 2.5% of his due Zakat to someone worse than him. If such funds are paid to someone struggling for a shelter, that person should also pay 2.5% of his due Zakat to someone worse than him, for example, someone need funds for medical treatment, clothing or food. 3. Problem: Currently Zakat is not obligated on personal use home, car, personal use jewelry and other items. This rules unfairly puts more burden of Zakat on those who live modestly and saves for emergencies as opposed to those who prefer to live lavish lifestyle with expensive home, cars and high living expenses. Such lavish living person are currently not obligated to pay Zakat on their personal use assets. Also due to their lavish lifestyle they are always in some sort of debt whether it may be credit card, vehicle, boat, real estate, etc. that further reduced their Zakat obligation. Solution: Zakat should be based on a person’s yearly living expenses, rather than savings. 2.5% Zakat on savings or investment should be paid when the savings or investment are diverted for personal use or after the death of the owner. Zakat on person’s yearly living expense should be determined by all expenses incurred through the year including, utilities, medical, education, food, entertainment, insurance, etc. Yearly rental cost of personal use property and home (Even if it is paid off). Yearly rental or depreciation amount on personal use depreciable assets, such as, cars, boats, planes, watches, etc. 4. Problem: Zakat seems to be assessed on the same assets year after year. This makes it very difficult for someone to save for emergencies or retirement. Even if emergency or retirement funds do not incur Zakat the issue arises as to how to determine the reasonable amount necessary for emergencies or retirement. For one person a million dollar may be sufficient and for another 5 million may not be sufficient for such purpose. Furthermore, for an average person making 2.5 percent income on saving is difficult and then on top of it an inflation of 3% to 10% reduces the effective purchase power of the saved money. So (2.5% income on savings minus 2.5% Zakat minus 5% inflation) leaves a person with approximately 5% or more loss on saved cash each year. Solution: Zakat should be paid only twice in the life of assets. Once on all business and personal assets, equipment and property (No Zakat on raw material or inventory or crops for sale). Once Zakat is paid on these items thereafter Zakat is assessed on the appreciated value. If assets value drops, then zakat will be assessed only when the assets reach higher than the previous highest value. Secondly 2.5% Zakat is paid upon the death of owner after paying any loan and legal fees. If any immediate family is deserving of Zakat, then it goes to family first. Zakat should go to closest relatives, starting by the person himself and his own immediate family (if they qualify) , parents, siblings, cousins, aunts and uncles, neighbors closer to farther, farther relatives and then others. 5. Problem: Zakat seems to be assessed on business assets, inventory, raw materials and crops. Solution: Zakat should be on the portion of profits used for personal use (Not if profits are saved for the emergencies, retirement or reinvested in the business) 6. Problem: Current determination of Zakat payable to government and various institutions or Mosques divert the funds away from the true deserving poor people of the society. Reaching Zakat funds to poor is necessary to improve society, quality of living for everyone and eliminate poverty related crimes. It is also necessary for the flow of money from rich down to poorest of the poor to reduce money hoarding by rich. It restarts the money cycle for the benefit of all. Solution: Funding needs for government, institution and mosques should be met through taxes or other charity funds, rather than Zakat money. Zakat should be distributed by the Payee himself or through trusted institutions who deliver the funds to those struggling to pay for essentials of life in the order of priority…food, clothing, health, shelter, source of income/education, marriage. 7. Problem: Currently there is no Zakat on the assets and estate of deceased. Solution: Since in the earlier solution, I proposed Zakat payment of 2.5% only once on personal investments, savings and property, then the second time Zakat on the same assets should be due when the owner dies. Upon death of a person, Quran recommends a portion for charity. There should be 2.5% Zakat on assets and estate of deceased. If heirs of such assets are poor enough, then the 2.5 Zakat can go to them first. NOTE: • Charity can be paid in any form of value, such as, cash, land, personal property, real estate, free rent, free work, etc. • Charity goes to closest relatives, starting by the person himself and his own immediate family (if they qualify) , parents, siblings, cousins, aunts and uncles, neighbors closer to farther, farther relatives and then others. • Charity can only go to those struggling to pay for essentials of life in the order of food, clothing, health, shelter, source of income/education, marriage.