Islamic Framework for Annual Budget

Dr Mohd Zuhdi Marzuki, Director of PAS Research Centre | .

While most of Malaysians’ eyes are recently focusing on the 2017 Budget tabled by Dato’ Sri Mohammad Najib Tun Abdul Razak on October 21, 2016, it is the right time to attract their attention to consider an alternative to the conventional fiscal policy. The alternative fiscal policy in this sense is surely formulated from Islamic perspective. Actually, the practice of Islamic Fiscal Policy began as early as the Prophet (pbuh) period by the implementation of Zakat System. According to the Muslim historians, the implementation of Zakat System has commenced two years after the migration of the Prophet to Madinah. In the other words, revisiting Zakat System is an important step to explore further the Islamic framework of fiscal policy.

Indeed, Zakat System is not only one of the five pillars in Islamic teachings, but also it is the main framework for every Islamic economic policy and activity. Accordingly, one of the main objectives of Islamic Economics is to maintain a just pattern of income and wealth distribution in society, hence it surely needs a reliable instrument. Allah the Almighty said in surah al-Harsh, verse 7:

What Allah gave as booty (Fai') to His Messenger (Muhammad SAW) from the people of the townships, it is for Allah, His Messenger (Muhammad SAW), the kindred (of Messenger Muhammad SAW), the orphans, the poor, and the wayfarer, in order that it may not become a fortune used by the rich among you. And whatsoever the Messenger (Muhammad SAW) gives you, take it, and whatsoever he forbids you, abstain (from it), and fear Allah. Verily, Allah is Severe in punishment.

This verse clearly indicates the above objective, that is, to ensure the wealth may not circulate only between the rich among us. In order to achieve this objective, Allah the Almighty obligates Zakat to those people whose properties exceed certain threshold (nisab), and the properties will be distributed fairly to needy groups.

Basically, in the conventional fiscal policy, it works through the government budget and usually through expenditures, taxes and subsidies at the national or federal level. Sometimes public debt is also taken into consideration. Whereas, in Islamic Fiscal Policy, Zakat System is highlighted to be the main framework for public revenues and public expenditures. According to Zakat System, the public revenues are collected from the groups that are instructed by the Quran and the Prophet Tradition (Hadith), so as the public expenditures are distributed to the groups that are specified by the two main sources. Therefore, Zakat collection and Zakat distribution become the main pillar of Islamic Fiscal Policy, and the other types of revenues and expenditures are inspired by this system.   

Besides Zakat System, the government can generate revenues from other sources including taxes, voluntary donations and so on, which should be complied with Shari`ah. Regarding the distribution of the non-Zakat revenues, the government have to distribute them in accordance with Shari’ah, especially when the revenues and the distribution will inevitably involve the right of non-Muslim citizens. Prior to the collection of Zakat and non-Zakat revenues, the Government in the first place needs to manage the income from public properties as well as natural resources, to be allocated in the budget for the purpose of benefitting people. The management of public properties and natural resources should always comply with the right of people especially the needy groups to be benefited by the nation wealth.    

In Islamic Economics, the main role of a government is to take care of their people, not to run businesses that will cause unfair competition with business players. Consequently, the general objective of Islamic Fiscal Policy is to achieve public interest and social justice. In more detail, the objective of Islamic Fiscal Policy suggested by Fazlur Rahman Faridi, is to achieve:

•Justice and equity
•Provision of socioeconomic needs of the community or socioeconomic welfare
•Enhancement of the community’s economic resources or economic growth
•Improvement in the cultural milieu of the society

By looking at the Islamic perspective of fiscal pillars and also its objectives, it is now easily to understand the Islamic framework for annual budget. Indeed, the actual role of government in this sense, is to manage the public properties and funds wisely, not to compete with the people in business and trading.

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