IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/19695.html
   My bibliography  Save this paper

An Alternate Approach to Theory of Taxation and Sources of Public Finance in an Interest Free Economy

Author

Listed:
  • Shaikh, Salman

Abstract

This unique study discusses the theory of taxation in Islam and the role of Zakat in an Islamic economy. Zakat is a compulsory payment i.e. a tax in this sense paid to the government on one’s income and wealth. The Zakat rates are studied for their viability and effectiveness to fulfill fiscal needs of the government. Based on the evidence from many countries, it is argued that Zakat rates are substantial enough to generate the needed public finance given the large tax base and free the government from using seignorage and deficit financing. Its compulsory nature both as per law of the land and as per religion would ensure minimum tax evasion and its progressive and direct nature would effectively redistribute income. The effect of Zakat on the overall macroeconomy, the financial system, monetary system, property market, stock market, inflation, foreign debt, balance of payments, FDI and the on the development oriented variables like inequality and poverty are also discussed to give a holistic view of the effects of the proposed system.

Suggested Citation

  • Shaikh, Salman, 2009. "An Alternate Approach to Theory of Taxation and Sources of Public Finance in an Interest Free Economy," MPRA Paper 19695, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:19695
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/19695/1/MPRA_paper_19695.pdf
    File Function: original version
    Download Restriction: no

    More about this item

    Keywords

    Interest free economy; Public finance; Taxation; Inequality; Income redistribution; Islamic Economic System; fiscal policy; deficit financing.;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:19695. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.