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

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