Zakaat and the Solar Year

[Majlisul Ulama]

Zakaat is an Islamic institution which is a Fardh lbadat of fundamental importance. It is one of the fundamentals of Islam. There is no distinguishing between the two fundamentals, viz Salat and Zakaat, in so far as importance is concerned. Islam has attached a host of laws to this institution of Zakat. Like Salat, it is a great and an independant lbadat which will be discharged only if the Shari rules relevant to it are fulfilled. Zakat being a strictly Islamic lbadat, cannot be hinged onto worldly considerations which interfere with the correct discharge of this obligation. It is not to be made a secondary institution merely because of inconveniences caused to us by the laws of finance and economics of the kuffar. Here we refer to the ‘Nisab Time’. Zakat becomes payable after twelve Islamic months have passed upon the attaining of the Nisab value. Regarding this time-period, we say that the solar calendar or the Christian calendar does not suffice. It is essential that the Islamic calendar – or twelve Islamic months – be counted regarding the time-period of the Nisab.

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In certain quarters it has been suggested that the Christian calendar too will be valid providing that 4% is added to the stock-figure obtained from the stock-taking after twelve solar months. Stock-taking is usually effected at the end of the financial year (which is after twelve Christian months) for income tax purposes. Muslim businessmen, therefore, employ these figures in the calculation of their Zakat, the argument being that it is too difficult to have two stock-takings – one for income tax and one for Zakat. The suggested addition of 4% to the stock-figure, is, ostensibly, to ‘rectify’ the discrepency which occurs as a result of the 11 day longer Christian calendar. However, in actual fact, the discrepency is not rectified by adding 4%. In fact, a number of serious discrepencies will result if the Christian calendar is employed for Zakat purposes. Hereunder we explain a few such serious discrepencies.

The Shariah does not apply Zakat tax to a part of the year. Zakat is payable for only full-year units. Hence, if Zakat has not been paid for two years, for example. then the only way of discharging the obligation is to pay Zakat for two years. If after two years and one month (for example) one decides to pay the past Zakat, one will be liable for two years’ Zakat and not for two years and one month, part of the year not being considered.

The addition of 4% resembles a penalty for late payment. But, the Shariah levies no penalty for late payment of Zakat.

Assuming that stock is taken 18 months after having attained Nisab, it will mean that the stock-figure has to be inflated by 50% since 6 months is 50% of the year, but this is at the end of the Islamic twelve months Mr Zaid had stock, cash and other Zakat-taxable wealth for the sum of R 20,000, but as yet he did not effect stock-taking because the financial year for income tax purpose has not yet ended. Eleven days after the expiry of the Islamic year, Mr Zaid takes stock on the 28th February and finds that his stock and other Zakat­ taxable assets amount to R 30,000. Now according to the ‘4% increase’ theory, the amount of R30 000 will have to be increased by 4%, giving a total of R 31,200 on which Zakat have to be paid, i.e. according to the ‘4% increase’ theory. However, according to the Shariah, Zakat should be paid on only the amount owned at the end of the Islamic year, which in this example is R 20,000. The additional R 10,000 by which the R 20,000 was augmented in the succeeding 11 days are exempt from Zakat. Zakat will be payable on the additional R 10,000 only at the end of the next twelve Islamic months, and that too if at the end of that period this amount remains in the form of Zakat-taxable assets. If during the course of the year this amount was lost, utilized or converted into non-Zakat wealth, e.g. motor car, building, furniture, etc., then Zakat will not be payable on it.

At the end of the Islamic twelve months Mr Amr had Zakat taxable assets for the amount of R 2,000, but as yet he did not take stock. Eleven days after (i.e. at the end of the financial year) he takes stock and discovers that due to some misfortune his Zakat-taxable assets were reduced to below Nisab. In this case, Mr Amr will not be liable for Zakat according to those who accept the Christian calendar for Zakat calculating purpose. But, according to the Shariah he is liable for Zakat on R 2,000 because at the end of the Islamic twelve months he was the owner of Zakat wealth for the sum of R 2,000.

At the end of the Islamic year Mr Bakr had Zakat-taxable assets for the amount of R 10,000, but as yet he did not take stock. Eleven days thereafter he takes stock. Within the course of the succeeding eleven days he had incurred debts for Now. according to those who accept the Christian calendar as valid for Zakat purpose, Mr Bakr will have to pay Zakat on only R 6,000 since according to the Shariah debts are deductable from Zakat-taxable assets. But, in actual fact Mr Bakr must pay Zakat on R 10,000 because the debts were incurred only after his Zakat became due on the R 10,000, hence, the debt of R 4,000 cannot be employed to offset Zakat payment in that sum.At the end of the Islamic year Mr Ahman had Zakat­ taxable wealth for the amount of R 100 which is below Zakat. A week thereafter he obtains by way of inheritance R 20,000. At the end of the financial year which occurred eleven days after the Islamic year, Mr Ahmad’s Zakat-taxable assets amounted to R 20,100. According to the ‘4% increase theory, Mr Ahmad has to pay Zakat on R 20,100 plus 4%. However, according to the Shariah he does not have to pay even one cent Zakat. He is not at all liable for Zakat on the R 20,000 since he did not own it at the termination of the twelve Islamic months.

At the end of the Islamic year Mr Qasim had R 8,000 worth of Zakat-taxable wealth but as yet he did not effect stock-taking. At the end of the financial year (which occurred eleven days after the Islamic year) he takes stock and finalises his accounts. During the course of the eleven days following the Islamic year (i.e. prior to stock-taking) Mr Ahmad converts R 6,000 of his Zakat-taxable wealth into non-Zakat assets, e.g. he purchased a motor car. Now according to his final figures realised after stock-taking the sum of R 6,000 will no longer reflect as Zakat ­taxable assets which will be an amount decreased by R 6,000, plus the suggested 4% increase on the stock-figure. But, according to the Shariah he is liable to pay Zakat on the  R 6,000 as well despite it having been converted into a non-Zakat asset because the conversion was effected after the Zakat became due on the amount.

At the end of the first twelve Islamic months Mr Zaid in actual fact had R 25,000 stock, but his debts amounted to R 25,000. Mr Zaid never took stock after the twelve Islamic months nor did he do so at the end of the financial year. The true position according to the Shariah is that Mr Zaid is not liable for Zakat because his debt eliminates his Zakat-taxable At the end of the following financial year Mr Zaid takes stock and finds that his stock is R 20,000 and his debts R 5000. According to the ‘increase’ theory he is liable for Zakat on R 15,000 plus an increase of 100%, i.e. he has to pay Zakat on R 30,000 because now the stock has not been taken 11 days after the Islamic year, but one year after the Islamic year. However, in actual fact, according to the Shariah, he has to pay Zakat on only R 15,000 (if this was the position of his Zakat assets at the end of the second Islamic year).

The theory to be employed in the event of stock being taken according to the solar calendar posits a 4% addition to the Zakat-taxable assets as at the end of the financial year calculated in terms of twelve Christian months. This percentage according to the theory remains constant, i.e. at the end of each successive solar year 4% will be merely added to the figures and Zakat levied on the total sum. This presents an unreal situation, for the percentage remains constant whereas the Islamic year in relation to the Christian year recedes by approximately 11 days (or the approximate 4% posited in the theory). In terms of the theory, the logical conclusion should be a successive increase of approximately 4% (3.1% to be more exact) per solar year since at the end of the first Christian year, the Islamic year would have lapsed by 11 days; at the end of the second Christian year, the Islamic year would have lapsed by 22 days, hence in terms of the ‘increase’ theory, the stock-figure will be inflated by 8% (6.2% to be exact); at the end of the third Christian year, the Islamic year would have receded by 33 days, hence in terms of the theory, the Zakat-taxable figure will have to be inflated by 9.3%, and so on. The percentage increase with which the Zakat wealth has to be inflated will increase with each year. This will provide 100% increase in the Zakat-taxable wealth after about 34 years. But, in no way does this ‘increase’ whether of 4% or 100% solve the discrepencies created by calculating Zakat at the end of the solar year. The ‘increase’ theory has no bearing to reality. It remains a fictitious and a groundless supposition.

Utilizing the solar year for Zakat purposes will magnify the incidence of error with each successive year which produces a constant recession of the Islamic year in relation to the Christian year. In the first year there will be an eleven-day gap between the Islamic and the Christian year; in the second year a twenty-two day gap; in the third year a thirty-three day gap, and so on. The greater the gap, the greater the danger of increased discrepency since more transactions could be effected in the greater time period. Every transaction involving Zakat-taxable wealth effected in this time-gap will affect the Zakat position. Zakat-taxable wealth which had been converted into non-Zakat-taxable items during this time-gap will be exempt from Zakat if the calculation is done at the end of the Christian year. And, all increases in Zakat-taxable wealth during this time-gap will be subjected to Zakat if the calculation is based on the Christian calendar. But, in terms of the Shariah, whatever Zakat-taxable assets have been converted into non­ Zakat-taxable items during the time-gap will be subjected to Zakat and all increases in Zakat-taxable wealth during the time-gap will be exempted from Zakat. Such increases will only be taxed by Zakat at the end of the next Islamic year, if such wealth still remains in one’s possession.

If Zakat is calculated on the basis of the Christian calendar, then one whole year will be missed out after about 33 years, and this ‘escaping’ of a year’s Zakat cannot be rectified or compensated by means of the unrealistic ‘increase’ even if at the end of the 33rd year the increase is 100%. The ‘gap’ between the Islamic and the Chrisitan years after 33 years will be one year, and in one year all one’s wealth may be depleted or lost, this bringing about the total ‘escape’ from Zakat even if 100% increase in the figures is effecteu. At the end of the 33rd Christian year, one may have Zakat-taxable wealth less than the value of Nisab whereas a year before when the time was due for the Zakat calculation one could have possessed a considerable sum of Zakat-taxable wealth.

If, for example, stock is taken only after two years and the figure for the stock is R 5,000 at this stock-taking. But, the amount of stock at the end of the first year was R 2,000. According to the ‘4% addition’ theory, the amount of stock will have to be increased by 100% since the stock was taken after two years. It will follow that Zakat should be paid on R 10,000 whereas in actual fact Zakat will have to be paid on only R 7,000 (R 2,000 for the first year and R 5,000 for the second year).

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