I.
Freeing government expenditure
The government expenditure model will be reformed to a
Shari'ah framework in order to target available funds optimally as the State
requires ‐ eliminating illegal expenditure such as interest debt repayments and
focusing the remaining funds on the critical needs of the State.
Significant burden on government resources would be removed
immediately by the cessation of payments on interest based loans.
The Shari'ah prohibits subsidies, which prop up inefficient
and unproductive businesses. Food subsidies are unnecessary due to aforementioned
mechanisms for price stabilization and reduced taxation. For example, in Egypt
this would free 30 billion EGP of government expenditure.
Ending subsidies will release government funds to target
assistance to those people who have no dependents and other specific areas where
the Shari'ah has obliged a priority or a focus e.g. schools, hospitals and
infrastructure.
II.
Stabilizing government revenue
The Shari'ah specifies a wide range of sources for government
revenue. The government will transform the revenue model to collect funds from
the ample and diverse range of Shari'ah sources.
These are more than adequate to allow the government to
fulfil its role of looking after citizens and of spreading Islam, without
imposing crippling taxes on the people. The Shari'ah defines the following
sources of government revenue that would be immediately available to the state:
i.
Zakat
‐ an excess wealth tax set at 2.5% above a minimum amount (nisab) applicable to
all citizens including business owners.
ii.
Kharaj
– a tax on the productive capacity of land. E.g. Egypt has over 3 million
hectares of arable land that is more than enough to supply Egypt’s population
given the appropriate high yield technology.
iii.
Energy/Minerals
‐ Revenue from the mining of minerals and the extraction of fossil fuels. E.g.
Again Egypt has around 4.4 billion barrels of proven oil reserves coupled with
2.1 trillion cubic meters of proven gas
reserves.
iv.
Jizya
‐ A nominal, means tested, head tax for non‐Muslims (excluding women, children,
the infirm and the elderly) exempting them from other taxation. This would be
set at a value that promotes community cohesion and the loyalty of the non-Muslim
citizens of the state.
v.
Emergency
surplus wealth taxation – as a last resort, if the need arises, a temporary
tax can be levied against the very rich in society.
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