Hierarchy of Principles for “Good” Zakat Laws

Zakat laws across the globe display wide variation. They vary in their goodness. They vary with respect to clarity, coherence and complexity. Goodness of the laws is about the content of laws, their architecture, their language and their accessibility. While it is not surprising that zakat laws and their subordinate regulations may be complex there is no reason why the degree of difficulty associated with them should be considered either inevitable or acceptable. Excessive complexity hinders efficient and effective mobilization and utlization of zakat resources, creating burdens for individuals, businesses and communities. Clear and effective zakat legislation is essential to good zakat management. It gives effect to policy, translating abstract principles and very specific provisions into legal remedies, while mediating between the (often) conflicting objectives, views and expectations of legislators and users.

There seem to be two key dimensions to the problem of complexity in laws: the volume of the laws and the quality of the laws.

Volume
Here we consider simply the number of sections and word-count of the laws. The following table shows the wide variation in the volume of zakat laws across different countries.

Volume and Efficiency of Zakat Laws

Country Indonesia Singapore Malaysia1 Sudan Pakistan Nigeria Maldives
Words 2514 332 306 5337 14766 3996 3374
Zakat Collected 231.6 20.4 642.7 228.8 105 3.1 3.1
Muslim

Population

215.4 0.8 18.4 35.5 172.5 62.5 0.39
Zakat Collected: Latest available figures in million USD
Muslim Population in million

From the above it is clear that there is an inverse relationship between volume of law and its efficiency. While volume is an indicator of complexity, and efficiency, too much brevity may not be ideal. In order to examine the complexity of laws, the second dimension, i.e. quality of the laws must
be put under scrutiny.

Quality

There is hardly an exhaustive and agreed definition of “high quality” law. The characteristics of a good law essentially are combinations of the following features:

  • it addresses Shariah objectives
  • it addresses political objectives
  • it addresses social objectives
  • it addresses legal objectives
  • it operates as efficiently as is practicable
  • it is intra vires (the lawmaker has sufficient legal authority to make the legislation)
  • it is consistent with (or effective in overriding) identified basic principles
  • it is sound in substance: a well-thought-out, full and harmonious scheme
  • it is clear, as simple as possible, and well-integrated with other laws
  • it is consistent with current legislative drafting styles and best practice
  • it has been produced in time and efficiently (without using excessive resources).

The law book may indeed be an ever-evolving network of complex information that expands organically and is extremely difficult to map. Nevertheless this paper seeks to undertake this task with utmost objectivity, the starting point of which is an enunciation of basic and Shariah principles governing zakat management and then mapping them unto the relevant legal provisions in the enactments. We follow the coherent principles approach in analyzing the complexity of zakat laws for the following reasons.

The Coherent Principles Approach

The coherent principles approach aims to present the law in a series of operative rules, that are principled statements about what the law is intended to do, rather than details about the mechanism that gets it there.[1] Coherence in this context means that the principle:

  • Helps the reader make sense and order out of the law;
  • Captures the essence of the intent of the law – so that it is clear on first approach;
  • Is drafted in a plain, non-technical style, avoiding the use of expressions that can only be
  • understood by referring to definitions or other lower level rules; and
  • Is intuitive or obvious to someone who understands its intent and context.

But, unlike some general principles approaches, the coherent principles approach can accommodate detailed or specific rules, when needed, by incorporating a plan for unfolding the principles and providing details of their application in particular cases. At times that additional detail will appear in the law itself. But at other times it will appear in the Explanatory Memorandum or in subordinate legislation (including regulations).
The benefits with the coherent principles approach are that the law will be simpler and shorter, more flexible, more stable, more certain, and because the draft law will be conceptually simpler, it will apparently provide a better basis for consultation.

Hierarchy of Core Principles

In seeking to evaluate the existing zakat laws using the coherent principles approach, we begin with developing the hierarchy of core principles of zakat management which form the normative basis for enactment of zakat laws. In terms of expediency, the statements used are of three types. The statements containing “must”, “should” and “may” reflect the order of importance of the concerned principles.

#0. Zakat may be either compulsory (#1) or voluntary (#2) in a given jurisdiction

#1. If zakat payment is compulsory, then

#11. There must be strong deterrents against non-payment

#111. Law may prescribe physical and/or financial penalty against non-payment

#112. Law may provide for forced recovery of due and unpaid zakat

#12. State should incentivize zakat payment through tax benefits

#121. State should permit deduction of zakat paid from taxable earnings

#122. State should permit deduction of zakat paid from tax payable

#13. State agency for zakat management must be in place

#131. Agency must be empowered to set regulations

#132. Agency must be empowered to enforce zakat collection

#1321. Agency must be empowered to seek any information from any individual or entity for determination of zakat liabilities of muzakkis

#1322. Agency must be empowered to demand any kind of assistance from other state agencies that is deemed necessary for effective zakat collection

#1323. Agency must be empowered to punish unauthorized collection

#133. Agency must be empowered to enforce zakat distribution

#1331.Agency must be empowered to punish unauthorized payment

#134. Rules and criteria for membership and executive positions in the apex agency should be in place

#135. A Shariah body should be constituted for advising the Agency in matters that require formulation of new regulations and rules and that have Shariah implications

#136. Financial provision should be made for Agency to cover its expenditure

#1361. State should provide finance to cover operational expenditure of the apex zakat body

#1362. Zakat body should be permitted to use part of zakat collected (subject to a cap) to absorb operational expenditure

#137. There should be provision of appeal by muzakki against a wrong decision by Agency officials

#14. Agency prescribes how to estimate zakat liability for individuals and businesses

#141. Agency stipulates general conditions relating to zakatability, e.g. hawl

#1411. Agency defines the zakatable assets/ output/ earnings

#1412. Agency defines assets/ output/ earnings exempt from zakat

#142. Agency stipulates methods of estimation of zakat base and applicable rates of levy

#143. Agency should be empowered to modify the list of zakatable assets, the conditions and methods of zakat estimation from time to time

#15. Agency must distribute zakat among asnaf in conformity with Shariah

#151. Agency should define the asnaf and prescribe methods to determine the same

#152. Muzakki may be permitted to retain a part of zakat for self-distribution

#153. Agency may decide on a priority scheme for distribution of zakat among asnaf

#154. Agency should seek distribution of all zakat collected during the same lunar year and avoid carrying undistributed surplus

#16. Agency should adhere to highest standards of accountability, transparency and good governance

#161. Agency should ensure separation of zakat funds from other forms of charity funds collected

#162. Agency should place the funds in safe and liquid avenues

#163. Agency should share information about zakat collection and utilization with the public with utmost transparency and in a spirit of sharing on a continuous basis

#1631. Agency should be open to suggestions from the community regarding zakat management

#164. There should be strong deterrent in the form of financial penalty and/or physical punishments for dereliction of duty, fraud, dishonesty on the part of zakat officials

#1641. There should be strict deterrent in the form of financial penalty and/or physical punishments against fraud, dishonesty and misappropriation of zakat funds

#1642. There should be strict deterrent in the form of financial penalty and/or physical punishments against Shariah non-compliance

#2. If zakat payment is voluntary, then

#21. State should incentivize zakat payment through tax benefits

#211. State may permit deduction of zakat paid from taxable earnings

#22. There must be an apex body for zakat management in the country, which may be (i) a state agency or (ii) an association/ committee of voluntary institutions

#221. The apex body must be empowered to set regulations/ guidelines for zakat management

#222. The apex body should (i) include Shariah scholars, or (ii) put in place a Shariah body for advising on zakat matters that have Shariah implications arising from time to time

#223. Rules and criteria for membership and executive positions in apex zakat body should be in place

#224. Adequate provision of finance to cover operational expenditure of the apex zakat body should be in place (i) through budgetary allocation and/or (ii) through contribution of a part of zakat collected by the zakat institutions towards covering its operational expenditure.

#23. The apex zakat body in consultation with Shariah scholars and other stakeholders (e.g. professional bodies in accounting, financial planning, inland revenue authorities, and community leaders) should formulate guidelines for estimation of zakat liability of individuals and businesses.

#231. Zakat institution (ZIs) should advise and assist the muzakki in estimating their zakat liabilities in conformity with the guidelines

#232. ZIs may appoint agents for collection of zakat against payment of commission

#233. ZIs may undertake zakat mobilization campaigns and use other solicitation mechanisms for creating awareness about zakat

#24. ZIs must distribute zakat among asnaf in conformity with Shariah

#241. ZIs should follow the guidelines issued by the apex zakat body for definition of the asnaf and the methods for their determination.

#242. ZIs may decide on a priority scheme for distribution of zakat among asnaf

#243. ZIs should seek distribution of all zakat collected during the same lunar year and avoid carrying undistributed surplus

#244. ZIs may be allowed to absorb part of zakat to cover their operational expenditure subject to a cap

#25. ZIs must adhere to highest standards of accountability, transparency and good governance

#251. ZIs must ensure separation of zakat funds from other forms of charity funds collected

#252. ZIs should place the funds, including undistributed surplus if any, in short-term safe and liquid schemes of Islamic financial institutions

#253. ZIs must at regular intervals disclose the figures of zakat collection and utilization by them to the community with utmost transparency and in a spirit of sharing

#254. ZIs must disclose the actual operational expenditure (including commission to agents, contribution to apex body) that is charged to zakat funds

#255. There must be strict deterrent in the form of financial penalty and/or physical punishments for dereliction of duty, fraud, dishonesty on the part of zakat officials

#2551. There must be strong deterrent in the form of financial penalty and/or physical punishments against fraud, dishonesty and misappropriation of zakat funds

#2552. There must be strong deterrent in the form of financial penalty and/or physical punishments against Shariah non-compliance

Mohammed Obaidullah | January 14, 2015

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