Durham E-Theses The theory of Zakah and its application in the Sudan (1980-88). Shumo, Eltayeb Ahmed How to cite: Shumo, Eltayeb Ahmed (1990) The theory of Zakah and its application in the Sudan (1980-88)., Durham theses, Durham University. Available at Durham E-Theses Online: http://etheses.dur.ac.uk/1185/ Use policy The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that: • a full bibliographic reference is made to the original source • a link is made to the metadata record in Durham E-Theses • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders. Please consult the full Durham E-Theses policy for further details. Academic Support Oce, Durham University, University Oce, Old Elvet, Durham DH1 3HP e-mail: [email protected] Tel: +44 0191 334 6107 http://etheses.dur.ac.uk The copyright of this thesis rests with the author. No quotation from it should be published without his prior written consent and information derived from it should be acknowledged. The Theory of Zakah and its Application in the Sudan (1980-88) by Eltayeb Ahmed Shumo A Thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy Economics The University of Durham 1990 i.,,;S i\:, ý a ýS ýý:,:ýýý -ý 'ý: :.: ýýý 15 NOV1991 Abstract The central problem of this research is to assess the current practice of Zakah in the Sudan and investigate its influence on the Sudanese tax structure and the main tools of fiscal policy. The study comprises seven chapters. The introduction defines the scope and purposes of the study, as well as discusses some of the methodology and techniques employed throughout the research. Chapter two gives a background of the salient features of the Sudanese economy and the developments of its tax policy and structure. Chapter three examines the principles and concepts of taxation and their relevance to the Sudanese case. Chapter four deals with the principles of Zakah and other Islamic levies and their rationale as a tax reform policy in an Islamic society. Chapters five and six examine the developments in the implementation of the system of Zakah in the Sudan and outline the major findings of numerous surveys carried out during the course of the study. The final chapter contains a summary and the conclusions of the research. It provides an evaluation of the significant potential contribution of Zakah to the Sudanese economy in general and to the taxation policy and social justice in particular. Copyright © 1990 by Eltayeb Ahmed Shumo The copyright of this thesis rests with the author. No quotation from it should be published without Eltayeb Ahmed Shumo's prior written consent and information derived from it should be acknowledged. 11 Declaration This thesis results entirely from my own work and has not been previously offered in candidature for any other degree or diploma 111 Acknowledgements This research was made possible through the invaluable financial assistance granted by the Sudanese government and the genuine encouragement and support of the many persons and departments who provided me with valuable information and data. To them all I owe my greatest debt and thanks. I would like to record my sincere thanks to my supervisor, Dr. Rodney Wilson, who has been helpful, generous of his time and a fund of knowledge during the period of the study. His comments and constant advice have contributed much in shaping the study in its present form. My gratitude is also due to the staff of the Computer Centre for their conti- nous help and valuable computing facilities, and to the University Library staff at Durham for their assistence to trace the relevant sources. May I also take this opportunity to thank the staff in the Chamber of Zakah in the Sudan who made every possible effort to supply me with the useful sources of information and to respond actively to the questionnaire conducted during the course of the study. Thanks are also due to the staff of the Department of Eco- nomics and to those friends and colleagues who often gave very helpful suggestions and remarks. Finally, I would like to acknowledge the great debt I owe to my parents who instilled in me the basic concept of Islam while I was young. I am indebted also to my dear wife, Intisar, and my children, Bashir and Rihab, for their unfailing support and patience. May it please Allah to accept this humble work. iv Contents Abstract ii ..................................... Declaration iii ................................... Acknowledgements iv ............................. 1 Introduction 1 .................................. 1.1 Statement the Problem 1 of ................. ..... 1.2 Motives for the Study 8 ........................ 1.3 The Significance of the Study 9 .................... 1.4 Aims and Objectives the Study 9 of ................. 1.5 Assumptions and Hypothesis 10 .................... 1.6 Methodology and Procedures 12 ............... .... 1.6.1 Statistical Analysis 14 ............. .......... ... 1.7 Limitation of the Study 15 ...................... 1.8 Concepts and Definitions 15 ......... ............ 1.9 Structure the Study of ........................ 18 2 The Sudan Economy Taxation Policy 21 and ............. 2.1 The Sudan Economy 21 ......................... 2.1.1 Salient Features 21 ............................ 2.1.2 The Growth Agricultural Production 26 of ............. 2.1.3 Incentive Policies to Increase Agricultural Output 30 ....... 2.1.4 The Growth Industry 33 of ....................... 2.1.5 The Sudan's Foreign Trade the Balance Payments 34 and of .. 2.1.6 The Sudan's Experiences Growth 40 of ........... .... 2.1.7 Sudan's External Difficulties Debt Crisis 45 and ......... 2.1.8 Problems Foreign Debt Debt Services 48 of and .......... 2.1.9 Domestic Inflationary Pressures 49 ................. 2.1.10 The IMF Sudan's Stabilization Programmes 51 and .. 2.1.11 Future Prospects 52 ........................... 2.2 The Sudan Tax Policy 53 ........................ 2.2.1 The Development Tax Policy 53 of .................. 2.2.2 Prominent Features the Sudan Tax Policy 55 of .......... V 2.2.3 Composition Direct Taxes 60 of .................... 2.2.4 Indirect Taxes 65 ............................. 2.2.5 Traditional Wealth Property Taxes 70 and ............. 2.2.6 The Economic Effects Tax Revenues 73 of .............. 3 The Theory Taxation Development 79 of and ............. 3.1 General Scope Definitions 79 and ................... 3.2 Tax Rationality Criteria 81 ....................... 3.2.1 Neutrality Criteria Taxation 82 of ................... 3.2.2 The Equity Criteria Taxation 88 of .................. 3.2.3 Administrative Feasibility Criterion Taxation 94 of ........ 3.2.4 Growth and Development Criterion Taxation 98 of ........ 3.2.5 Economic Stability Criterion Taxation 102 of ........... 3.2.6 Equitable Redistribution Criterion Taxation 105 of ........ 3.3 Tax Compostion and Development 107 ............... 3.3.1 An Overview ............................. 107 3.3.2 Tax Classification: Direct Versus Indirect 108 ........... 3.3.3 Direct Taxes ............................. 109 3.3.4 Difficulties Income Taxation 116 of ... ................ 3.3.5 Indirect Taxes 117 ............................ 3.4 Wealth Taxation: In Theory Practice 124 and ........... 3.4.1 Purposes General Scope 124 and ................... 3.4.2 Forms Wealth Taxes 127 of ....................... 3.4.3 General Arguments for Wealth Tax 132 a .............. 3.4.4 Arguments Against Wealth Tax 135 a ................ 3.4.5 Wealth Taxation in Industrial Countries 137 ............ 3.4.6 Wealth Taxation in Developing Economies 140 .......... 3.4.7 Summary Conclusion 143 and ..................... 4 The Zakah Tax Policy in Islam 146 and ................. 4.1 An Overview 146 ............................. 4.2 Origins Developments Islamic Fiscal Policy 149 and of ...... 4.3 The Institution Zakah 152 of ...................... 4.3.1 Policy Developments 152 ........................ 4.3.2 Concepts Definitions 154 and ..................... Contemporary Approaches to the Zakah 156 4.3.3 ............ vi 4.3.4 The Zakah Base Rates: General Properties 160 and ....... 4.3.5 General Rules Underlying the Zakah 167 .............. 4.3.6 The Zakah Contemporary Principles Taxation 172 and of .... 4.3.7 Other Economic Implications Zakah 178 of ............. 4.4 Other Levies in Islam their Origins 181 and ............ 4.4.1 The Kharaj the Land Tax 181 or ................... 4.4.2 The Jizya Poll-Tax 189 or ....................... 4.4.3 The Ushur Tax Trade 192 or on .................... 4.4.4 The Ghanima, Mines Treasure-troves 193 and ........... The Sudanese Experience Zakah 197 5 of ................. 5.1 Introduction 197 ..................... .... .... 5.2 Developments in Legislation Policy 198 and ............ 5.2.1 Salient Features Zakah, Pre 1984 199 of ............... 5.2.2 Developments in the Practice Zakah 1984 206 of after ...... 5.3 The Zakah Agricultural Produce 207 on ............... 5.3.1 How Taxable Limits Rates Determined? 211 and are ....... 5.3.2 Methods Collection 212 of ....... ........ ........ 5.4 Zakah Articles for Trade Financial Holdings 218 on and ..... 5.4.1 How the Zakah Base is Specified? ................ 220 5.4.2 The Assessment the Zakah Base of ............... 224 5.5 Zakah Animal Wealth on ..................... 226