The present paper is an attempt to analyse Zakat as the irreducible minimum ingredient of the fiscal policy of an Islamic State. At the very outset it rejects the popular stipulation that fiscal management in an Islamic State is coterminous with Zakat: o­n the contrary, it assumes the permissibility and also occasional desirability of additional mobilisation of resources for state production of “social goods” in an Islamic Society. It attempts to incorporate Zakat in the overall framework of fiscal policy and studies it as the “leading sector” of the broader complex of revenue-expenditure pattern of public authorities. Zakat is treated here o­nly as an “economic variable”, though its religious importance cannot be minimised, and will be occasionally referred to during the course of this study. The general economic significance of Zakat happens to be directional, and normative. It defines the norms of economic activity, also of fiscal activity as a subsection thereof and determines, through its effects o­n economic variables, flows and magnitudes, the direction along which the economy is desired to move.

Assumptions and Limitations

1. Prohibition of interest (riba).

2. Prohibition of gambling, hoarding and fraudulent trade practices.

3. Imposition of Zakat.

(b) In addition to the above, the present analysis assumes minin mobility of capital and labour as between the interest-free and inter based societies. This assumption is particularly meaningful in view of absence of interest and prohibition of a number of investment avenues the Islamic economy which are highly lucrative in the modern “inter laden” and capitalist societies. Free mobility of capital as between “interest-free” and “interest-laden” society may, other things remain, equal, encourage flight of capital from the former to the latter, and there vitiate the “investment effect” of Zakat analysed in the following sectic It may be contended that such an assumption is unnecessary for it assum an inherent repulsion to “risk taking” in the richer classes of the societ But that is not true for it overlooks the fact that prohibition of interest’ o­nly o­ne ingredient of the Islamic economic policy. This assumption, hovs ever, does not rule out state-to-state international capital transactions fo-obvious reasons.

Limitations

One major limitation of the subsequent analysis is the absence of any empirical base to support its conclusions. This is as it should be, o­n account of the present conditions of Muslim societies which do not provide the institutional framework in which the Islamic fiscal policy based o­n Zakat has to operate. Hence, the present analysis has been attempted more or less o­n the pattern of scientific conjecture. The present socio-economic system of the developing countries modified in essentials of Islamic cultural milieu has been assumed for this analysis. This writer is aware of the implications of this severe limitation but believes that the present analysis is still essentially not wide of the mark and serves to provide necessary insights into Zakat and its relationship with Islamic fiscal policy.

Zakat is the positive component of Islamic economics while the prohibition of interest is its negative ingredient. Together they draw the landscape of the Islamic economy and represent, as it were, the two facets of the same policy. The description of Zakat (or Sadaqah} in the Qur’an, its exposition by the Holy Prophet through his words and actual implementation, and its subsequent elaboration by Sahabah (Companions of the Prophet) and Islamic jurists give the student of economic theory substantial insight into the economic and fiscal orientation of an Islamic economy.

Fiscal Norms of an Islamic Society

The basic orientation of an Islamic economy [1] is mutual sharing of the community’s income between the affluent and have-nots. The rich are encouraged to transfer a part of their earnings through Zakat and Sadaqat to the poor. While Zakat is a compulsory levy, the Sadaqah is a voluntary transfer of o­ne’s savings. This objective may be described as that of social insurance which is an obligation of both the state and the individual. We have avoided the use of the word egaliterianism to describe the said objective for reasons to be stated later. An important corollary of Islamic economic teachings is the productive.use of investment of al-Amwal, the economic resources, for the economic betterment of the society. Hence the promotion of productive use of economic resources happens to be another norm of an Islamic econemy. [2] Since the objectives of fiscal policy are derivatives from the overall goals and orientations of the socio-economic policy of a society, we can state its two objectives as follows:

1. To ensure minimum means of livelihood to each and every individual in the community.

2. To ensure productive use of economic resources for the material well-being of the community.

Zakat as the Determinant of the Nature of Fiscal Policy

In terms of the current phraseology the two objectives may be described as growth with “social justice”. In the attainment of these objectives the Islamic fiscal theory does not preclude the use of modern techniques of raising, revenue per se. Nor does it consider the state allocation of economic resources as required by the socio-economic priorities in contemporary developing economies as inherently incompatible with its own system. But Zakat occupies a central place in Islamic fiscal policy and operations. Since its rate is given it lends an element of stability to public revenues which is particularly useful in maintaining budget stability. [3] A set Zakat rate however does not involve a fixed collection since a rise or fall in individual incomes would be automatically reflected in corresponding changes in the total Zakat collections. The revenue collection from Zakat would, however, provide the stable’ minimum quantum of revenues required for the promotion of the above objectives of fiscal policy. But Zakat also lays down certain imperatives of the tax system of an Islamic economy. These may be enumerated as hereunder:

1. No. additional levies o­n personal or collective incomes can be imposed o­n assessees whose incomes fall below the Nisab stipulated in Zakat.

2. In the calculation of assessable income “expense” items shall have to be deducted as are done under Zakat law. The deductible items have been examined in detail in the Shari’ah in different cases, such as the owners of cattle wealth, the producers of agricultural goods, the traders, and other affluent groups. These have to be taken account of and strictly adhered to, not o­nly in Zakat but additional levies as well.

3. Double or multiple assessment of the same base is not possible in o­ne stipulated period in Zakat. Hence such a policy is to be avoided in case of other direct taxes. The fiscal implication of this principle should be fully understood. It involves the exclusion of such levies as wealth tax if assessed o­n the base of the Zakat, that is, net wealth of the Zakat assessee and are yearly recurrent. As far as those taxes which are leviable o­nce, such as inheritance tax, or estate duties they are a separate category, and are assessed o­n a base different from the Zakat base. Hence these do not fall under the purview of this principle.

Given these principles the Islamic State is free to impose additional levies to meet its ordinary and welfare or growth expenditures. Before we proceed to consider the economic implications of Zakat, let us study this aspect of the matter a little more closely.

Additional Levies

We have maintained above that an Islamic State can impose additional direct levies to raise its revenues. The most important of modern fiscal devices in this sphere are taxes o­n personal or corporate incomes. Income tax is assessed o­n a base different from Zakat – it is levied o­n current incomes and not savings, although it allows certain specific deductions, but it takes into account neither the net savings of the assessee nor the period for which he holds them intact. Consequently the third principle stated above does not cover it. But the exemption limit allowed under income tax Jaws shall not fall below Nisab. This tax is also not subject to principle No. 2 above since it takes into account the flow and not the magnitude. The second important tax is inheritance and/or estate duty which is also permissible as pointed out above.* Similarly taxes o­n professions, etc., whose base is different from Zakat are all legitimate. Taxes o­n consumption expenditure may sometimes become necessary to discourage deliberate evasion of Zakat and wilful obstruction in the fulfilment of its secondary function, namely, the promotion of productive investment of o­ne’s savings. Capital gains tax has also a different base and is levied o­nly at o­ne particular point of time. Thus quite a number of currently operative direct levies arc permissible in an Islamic State.

All of these and similar direct taxes arc subject to variations both in respect of the exemption limits and rates, depending upon economic and equity considerations in a society. A steeply progressive rate of income tax with a low or moderately high exemption limit is popular in most of the developing economics these days. But this is not a universally valid policy measure, for general economic sluggishness may call for an entirely different order of things. Indications in the developing economies point to a relaxation in this policy o­n account of what is popularly described in current economic literature as “stagflation”. The harmful effects of steeply progressive taxes o­n incentive and the drastic erosion of the real value of money have forced new thinking in both the affluent and poor economies.

Income Elasticity of Zakat

The element of flexibility noticeable in the fiscal devices other than Zakat has led some of our friends to question the authenticity and universality of a given rate of Zakat and to recommend a change thereof. [4] In our opinion such a recommendation is contrary to Shar’ah and is born of a misunderstanding of both the nature of Zakat and also its alleged “inflexibility”. In the first instance, it must be clearly understood that Zakat is not a “tax” o­nly. It is an ‘Ibadah as well. No change in it is permissible. In the second place Zakat is not an “inflexible” fiscal measure. Its base is the net savings, or net wealth of an assessee. These bases are variable in size and are likely to grow or decline in response to variations in income. In addition, the deductions allowed o­n account of trade or consumption expenditure do not vary in magnitude proportionately to fluctuations in the scale of economic activity or incomes. The marginal propensity to consume bears a stable relationship to income in the short period and may decline, other things being equal, after a certain level of individual income. Thus deductions allowed o­n account of consumption expenditure have little likelihood of substantial growth to the detriment of Zakat collections. The case of trade expenses is not so clear. But certain items of costs are subject to economies of scale. Hence every change in the scale of economic activity may not cause a proportional rise (or fall) of such costs. These considerations lend “built-in flexibility” to the statutory rate of Zakat although its degree of sensitivity of yield in response to changes in income may not be so high as that of some other taxes.

Stability and Countercyclical Use of Zakat

The Statutory rate of Zakat and fixed Nisab (or exemption limit) accords to fiscal policy the much needed stability core. In the first place, a fiscal system based o­n Zakat, involves an automatic fluctuation in state revenues in response to changes in the size of its base in response to changes in income. Together with appropriate combinations and permutations of other taxes, it may work for an automatic stabilisation of total income (and employment). In addition it may also lead to a stable budget. The latter point may be understood more accurately in terms of the specific items of Zakat disbursements. Quite a few of these are intended as transfer payments to the poor (or unemployed). As economic prosperity increases the required volume of such expenses may decline, thejeby causing an accumulation of budget surpluses. These accumulated budgetary surpluses o­n account of Zakat, may be held over during these years [5] and used when recession or depression sets in and causes hardship to people. Of course, under Zakat, all unemployed people will not benefit, for such would be entitled to benefit as do not own Nisab. Nevertheless budgetary surpluses or deficits, arising out of Zakat collections man disbursed in a countercyclical manner, or more appropriately, as of compensatory fiscal policy.

In deflationary conditions, the total Zakat collections would declin spite of its fixed rate. While during the period of rising incomes, thriving business, Zakat levies may be paid out of the current flow income, during the downward swing of the economy they may constiru charge o­n hoarded wealth and/or net savings. This is likely to reduce assessable wealth and hence Zakat collections. Together with this development, greater deductions o­n expense account may be allowed in view of falling individual incomes. Thus the number of people assessable and total Zakat-able wealth would tend to decline.

The stable tax rate combined with a variable volume of disbursement Zakat funds in response to rise or decline in total employment in advanced economy serves as an automatic regulator of governrnent expenditure. This characteristic of Zakat tax, if judiciously combined with similar fiscal devices, is likely to work for stability without major dislocations in the economy.

The Developing Economies and Zakat-Based Fiscal Policy

Nearer home is the question of Zakat’s impact o­n a developing economy. Most of the Muslim countries fall into this category. Let us, therefore consider and analyse the impact and utility of Zakat as.a fiscal measure in an Islamic developing economy. Such an economy shares a number of characteristics commonly associated with a developing economy. But in addition to these, its distinctive features are the prohibition of interest, exclusion of speculative purchase and sale of stocks, hoarding and stockpiling of goods with the express design to create scarcity, merchandising of prohibited goods and services such as wines, etc. In such an economy the most urgent problems are development and social justice. Fiscal policies in Islamic developing economies would be geared towards increase in private and public savings to release real resources, for productive investment and to allocate public expenditure in such a way that it serves the twin purpose of growth and social welfare. In what respects, and to what extent, can Zakat collections and disbursement be of use in the implementation of these objectives ?

A: Savings and Investment

Zakat levies may have two opposite effects o­n private savings and investment. An annual Zakat levy o­n net savings (or net wealth) above the Nisab limit is likely to strengthen the propensity to consume. An individual saver may derive greater satisfaction from avoid the yearly Zakat levy which threatens to eat away his net savings. Thus the consumption function has an upward shift. But it may produce an entirely different reaction in him. In order to protect his wealth from gradual erosion, he may turn his idle wealth into active real or financial resources. His willingness to invest may be intensified. [6] Both these tendencies would, in the ultimate analysis, cause an upward shift in the demand for goods and services produced in the economy. Hoarded wealth would be turned into an active agent of demand, while investment would increase in response to, and almost in proportionate measure to, the power of Zakat to erode idle resources. Increased demand for consumer and capital goods would contribute to greater production.

Considered from another angle, the power of Zakat to erode idle wealth, and its punitive imposition o­n hoarded precious metals, would tend to increase the supply of savings (in an economic sense) in comparison to its demand.

B: Decline in Expected Rate of Return o­n Savings

This effect of Zakat would be beneficial in as much as it would reduce the expected rate of returns, thereby pushing investment in economically less profitable, yet socially productive and urgent directions. In the absence of interest-yielding transactions, the reduced profit expectations, are likely to induce private capital to venture into those fields which, in normal circumstances, it would leave for public authorities. Of course, there would be a minimum profitability limit of such investments. Its rate of return must not be below the Zakat rate but must be above it measured by the cost of inconvenience involved in such investments. The unduly long gestation period of such investment may work as another constraint. Thus even though the Zakat levy is likely to reduce the price of savings (or to use our own expression, the expected rate of retufn o­n savings) it would still leave a large area for the state expenditure programme.

C: Willingness to Work

Looked at from another angle, the punitive nature of Zakat, would exercise a healthy and positive impact o­n people’s willingness to work o­ne of the parameters of economic development pointed out by Lewis. [7] The natural desire to protect o­ne’s net savings, in the absence of the effortless accretion to it through interest, would strengthen the desire of the individual to work harder, or to enable others to work harder with the help of his resources. In this way idleness would be discouraged and work rewarded.

Public Expenditure and Zakat

So much then about the impact of Zakat levies o­n private savings and investment. Turning now to public consumption and investment, we may visualise a positive relationship conducive to increased production greater justice between Zakat and the fiscal policy. Zakat levies are to provide substantial funds to the state exchequerin a developing economic for three reasons. Firstly it would make accessible to the tax authority such items as are ordinarily beyond their purview. o­ne of the features of backward economy is substantial investment in precious metals and Iand property as a savings avenue. This preference for non-economic investment in precious metals renders a sizeable quantity of national wealth nonavailable for productive use and inaccessible to the state fiscal machin in ordinary circumstances. The Zakat levies o­n such “hoardings” word discourage such unproductive  investment, and provide incentive economic investment. o­n the other hand it would enable the state to lay fiscal hands o­n these items of “net wealth”. This would provide such stantial funds to the state. Secondly the low exemption limit of Zakat (Nisab) would enable the state to throw its fiscal net quite wide. Third the incentive effect of Zakat would be likely to increase productive invesment, and hence net savings in the economy. As this happens the base the Zakat levy would widen, bringing in more resources.

But more important is the disbursement of Zakat funds. In this connection we will consider the avenues of expenditure and their modus operans. The Qur’an [8] has specified clearly the categories of people, and the avenued o­n which Zakat collections can be expended. The categories of people entitled to benefit from Zakat are the poor, the pauper, the indebted, the wayfarer, the new converts and the avenues have been enumerated as the liberation of slaves, maintenance of Zakat administration, and last but not least “in the path of Allah”. Without going into the details of the minued interpretative analyses of each of these categories and avenues by the leaders of Islamic jurisprudence, we may rest satisfied, for the present with their apparent meanings and consensus regarding the last-mentioned avenue.

It may be noted that this detailed specification of the items o­n which the Zakat fund can be expended, is eminently useful in the context of the experience of many developing economies in the modern world. As pointed out by a host of economists, such as Myrdal, Bauer, Ursula Hicks, Nurksed Chelliah, an economically appropriate allocation of public expenditure between competing needs of growth and equity has been o­ne of the major headaches of the developing economies in recent times. Swayed by short term political considerations or ideological indoctrination, the governments in the developing countries have tended to ignore long term growth needs and have wasted scarce resources o­n wrong notions of social justice or short term schemes of welfare. o­n the other hand, we have noticed excessive emphasis o­n production planning weighted in favour of schemes with long gestation periods and increased investment in capital goods industries, at the expense of improvements in the standard of living of the masses. The Islamic fiscal policy based o­n Zakat would provide the state with a reasonable minimum of resources intended for social welfare. No exogenous considerations, economic or political, and no fiscal contingency except that related to Zakat objectives, would be allowed to curtail the social welfare expenditure below the quantity raised through Zakat, except of course, that specified in Zakat law itself. In the second place, the delineation of items of Zakat disbursement, would also serve to protect its allocation against the economic, fiscal or political whims of the administration.

In the context of the developing economies of today, this characteristic of Zakat collection and disbursement would be of immense utility.

Investment of Zakat for the Benefit of the Poor

The most important aspect of the matter is the mode of disbursement of Zakat funds. The simplest method is to expend these funds through transfer payments to those entitled to receive them. But a deeper understanding of the objectives of Zakat, in the light of modern economic analysis, makes its utilisation possible in such a manner as to produce a cumulative effect o­n poverty and as an instrument of active fiscal policy designed to promote the welfare function of public expenditure. These funds or a part thereof may be earmarked for productive investment intended for the benefit of eligible recipients in firms or industries owned by them. Such investments may be dovetailed with overall investment priorities of the economy. Thus these funds would serve two purposes at the same time. o­n the o­ne hand, they would minimise the non-investment or consumption expenditure arising out of substantial and regular transfer payments of Zakat in an economy. Since the marginal propensity to consume at low levels of income is not usually more than unity, and since in a developing economy it is fairly high all round, the two would together further depress the ratio of savings to GNP. While at high levels of employment the upward shift of the consumption function may be desirable in certain conditions, the developing economies are confronted with an unusually low ratio of savings to current incomes and would very much like to restrict consumption. If Zakat funds flow into investment channels, it would reduce its negative effects o­n savings and add to gross national product. o­n the other hand, investment-oriented disbursement of these funds would have a cumulative effect o­n poverty.

Multiplier Effect

A certain amount of Zakat funds, invested according to the overall production priorities of an economy, would benefit the poor, in particular, and the economy, in general, through its multiplier effect o­n employment and incomes. Let us for the sake of illustration, assume that Rs.100 are spent as transfer payments in o­ne year. If the marginal propensity to consume is 1, which is most likely to be the case for people below the poverty line, all amount would be expended o­n the purchase of consumer goods. To resources would thus be lost for ever in so far as the recipients are cerned, with the exception of such cases, and such parts thereof, as spent o­n the improvement of the productive efficiency of the spender, economy may benefit in so far as the additional demand for consume goods increases production and employment. The resultant multipler effect however is likely to be low o­n account of the strong probability to such funds would, for the most part, be spent o­n non-durable consume goods. If however, the same amount was invested in productive active a regular flow of income would accrue to the recipients, while the say amount would not o­nly remain intact but may progressively increase depending upon the rate of profit and the immediate expenditure needs the recipients. At the same time assuming income multiplier equal to which is the value usually assigned to it in the developing economies, said amount would benefit the economy three times its original value.

The periodical net profits from such enterprises would accrue to shareholders, the recipients of Zakat who have agreed to invest there But such of these as opt for employment in these undertakings would benefit o­n two counts, both as shareholders receiving .dividends and wage-earners. With the lapse of time, many o­ne-time recipients of Zakat may not remain eligible for it. Yet they would continue to receive income from these undertakings. The savings from such enterprises may either ploughed back into the same, or elsewhere. It must be noted, however, the such corporate net wealth would be assessable for Zakat in the period subsequent to the payment (or investment). There is every likelihood that individual’s net wealth built up through these investments would also attain the Nisab limit after a few years and become assessable for Zakat In this way the expenditure of Zakat funds would have a multiple effect of the economy. It would gradually eliminate poverty instead of providing recurring financial support to the same set of people. It would increas employment and income in the economy, thereby raising the standard of living in the economy. And lastly it would enhance the aggregate volume of Zakat collections.

Investment in Welfare Services

Zakat funds may also be allocated to those avenues of public expenditured which improve the working conditions and the efficiency of the eligible recipients Improved housing facilities, health services,  training programmes, educational institutions and a number of similar services may be initiated for this purpose. In this fashion, the welfare function of public expenditure would be promoted. A survey of the poor economies of today reveals the alarmingly low ratio of such expenditure to GNP in many of them. If even 1 per cent of net national wealth, not current national income, is earmarked yearly for such services, it would account for a reasonably high level of welfare expenditure in the state budget. [9]

If the foregoing stipulation is legidmat Zakat can be used as an effective instrument in the fulfilment of the allocative as well as the distributive furlctions of fiscal policy. As stated earlier this allocation can be woven into the overall investment priorities of the economy in such a way as to serve both purposes. In addition, it can be handled as an element of compensatory fiscal policy and can bring about adjustments in consumption, savings, and investments.

The Ratio of Transfer Payments

It must be pointed out however, that we are not advocating the complete elimination of transfer payments from Zakat revenue. In the first place such a policy may lead to a deliberate misuse of Zakat funds by the state. Secondly, transfer payments are the best mode of Zakat disbursements in certain cases, such as debts, accidents, starvation, old age, support etc. Thirdly the time lag involved between investment and current flow of income may require transfer payments. Fourthly, failures of business and industry launched through Zakat funds may necessitate transfer payments to those affected.

The best alternative would be to devise a reasonable distribution of Zakat revenues into the alternative uses pointed out above. The ratio of these uses to each other may not be rigidly fixed. But we can safely assume that the Qur’anic enumeration of eight uses does serve as an indicator that not less than 12.5 per cent of the total should be earmarked for each use. Yet it does not stipulate that the disbursing authority shall not be competent to transfer funds from o­ne alternative use to the other in the interest of the eligible recipients themselves and to serve its objectives better.

Notes
* Dr.  F.  R.  Faridi,  Reader, Economics Deparlment, Aligarh University, Aligarh (India).

* This is the view of the author. Other Muslim scholars and jurists hold different view and they do not accept the view that estate duly or death duty can into the Islamic fiscal framework. Editor.

1. Cf. Hassanein, M., “Towards a Model of the Economics of Islam” in MSA Contemporary Aspects of Economic and Social Thinking in Islam (Proceedings of the III East Coast Regional Conference), N.Y. 1970.

2. For a penetrating analysis of the norms of an Islamic Economy see Mawdud Economic Problem of Man and its Islamic Solution. Maktabah Jama’t-i-lslamic Delhi; AI-Qardawi, Y.: Fiqh al-Zakat, p. 43,. Vol. I and p. 851, Vol. 11:  1969. Ibn-’Ashur, M. T., Principles of Social Organisation in Islam (Arabic), pp. 190-1970 Maktabah al-Rasmiyeh, Tunis, 1964; Qutb, Syed: Social Justice in Islam (Arabic Ghazali, M, Islam and Economic Organisation (Arabic), Cairo; Abu Zahra Tanzim al lstam-li-’lmujtama’; Abu Saud, M, Main Features of Islamic Economy (Arabic); Ziauddin Rees, M., Al-Kharaj in An Islamic State (Arabic); Nahdh Misr and Abu Yusuf, Al-Kharaj, Al-Matba’ al-Salafiya. See CED, “Taxes and Budget”, a programme for prosperity in a free economic in Readings in Fiscal Policy, A.E.A. London: 1965, p. 360.

3.

4.See for instance, Zadi, A. M., “The Role of Zakat in the Islamic System Economics of Curing the Poverty Dilemma” (p. 14) in AMSS: Proceedings Third Seminar, Gary, Indiana, 1974.

5. It may be noted here that, contrary to the opinion of some Islamic jurists, the no compulsive direction in the Qur’an or the Sunnah to disburse the Zakat conections immediately. If Zakat is intended for the benefit of its poor recipients, it require both its immediate transfer, and/or its retention depending upon serves their interest better.

6. Cf: Kahf Monzer, “A Model of the Household Decision in the Islamic Economic in AMSS: Proceedings, op cit. (p. 21).

7. See Lewis, W. A., The Theory of Economic Growth, London: 1963 (low predition), p. 33.

8. The Qur’an IX: 60.

9. It would be highly illuminating to attempt a calculation of the ratio of Zakat revenues to total public revenues in an Islamic economy. But an empirical investigation is not possible for various reasons. Yet a scientific conjecture can be made keeping in view the following features of Zakat levy: (a) It is a tax (say, at a constant rate of 2.5%) o­n net national wealth (that is investible goods), (b) Most of the amount is specifically earmarked for expenditure o­n the welfare of the poor, would be very difficult to attempt such a calculation in the present study. For the sake of tentative illustration, let us assume that GNP is equivalent to net nation wealth (minus those owned by authorities). Suppose further that public revenue constitute about 25% of GNP. In that case about 10% of total public revenue would be spent o­n the welfare of the poorer sections of an economy. This estimated is, however, o­nly illustrative and open to substantial corrections in the light of bottle an accurate assessment of the ratio between Zakat assessable non-state net wealth of the economy and GNP, o­n the o­ne hand, and GNP and public revenues, o­n the other, and future empirical investigation.

The study assumes a socio-cultural milieu based o­n Islamic precepts and values. The Islamic fiscal policy can operate o­nly as a complement to other facets of socio-economic policy: its success or failure depends o­n their availability. Like its counterpart elsewhere its objectives are derived from the aspirations and goals of the people where it operates and its modus operandi is subject to their value-orientations and behavioural pattern. There is nothing like “pure fiscal theory” comparable to “pure science”. Hence, we assume an Islamic society. It must be noted, however, that this assumption is not “idealistic” referring to some highly abstract set of concepts. It refers to an institutional organisation based o­n Islamic teachings, some important features of which are as follows:

(Selected Paper From First International Conference on Islamic Economics)
- By F.R. Faridi