Monday, December 18, 2006

What Could A Real More Islamic Policy Revamp Look Like: Ideas On Taxes

We have been a little trapped I feel by the trend of having the powers that be in Malaysia, or those linked to them, establishing the agenda for debate on policies to be implemented in the country. I suppose in some ways this is the fault of our earlier leaders who for the most part, either had good ideas, or had ideas of such grand scheme, not too many of us had the capacity to suitably react!

Unfortunately, the ideas being kicked around these days are pretty run-of-the-mill, or a little too obvious. On top of that, their implementation appear to be a little unsuccessful.

e.g. We will Eliminate Corruption! Really... what a novel idea! I would ever thought of that (LOL). By the way, I thought we were eliminating this corruption thing since 3 years ago now, but why do international monitors now see the country as suffering more corruption?

Well, if we are not happy with this state of affairs, we would be at fault if we didn't try to put some of our own ideas across. If anything, this may lead to gaining credence and refinement for the better of our ideas, with the hope of implementation of the deserving perhaps?

I'm keen on giving this a whirl. Lets begin with something like say... taxes! What changes to the tax code may be interesting to explore in Malaysia? And to add some dimension to it, let's link this policy revamp to a moral code, which to me would be Islam.

OK, in the early days of Islam, 'tax' took very specific forms. One form of tax, called 'Jizyah', began as a tax applied to non-Muslims to provide them parity of treatment as citizens whilst they were exempt of duties defending the nation, which is an obligation according to Islam. In fact, some non-Muslims were exempt from Jizyah due to their taking up the duties of defending the nation side-by-side with Muslims.

So, if this was the case, shouldn't we move to have the salaries of our armed forces as well as probably our civil defence personnel tax exempt? One may even be able to make the argument for civil servant salaries to be tax exempt, but lets start with the armed forces, the police and the fire department, as I doubt there would be much argument that this is in line the principles of Jizyah and its exemption in the past.

(Besides, I've always found it a silly exercise to have our civil servants' pay, which comes from our taxes, being taxed themselves! Seems easier to make the recipient of tax monies as pay to have a reduced pay that's tax free in the first place.)

This may not be earth-shatering as ideas go, but can you imagine the power of extending the theory behind Jizyah. So, what constitutes a warrior in the current world? Would a trade negotiator for FTA's etc. for instance be a warrior worthy of tax exemption? What about athletes at international meets? Do their efforts as warriors for the pride of the nation make them deserving of tax exemptions?

We can even ask what dimensions tax exemption can take. For instance, rather than have all civil servants salary tax exempt, can we consider the idea of having civil servants exempted from any property related taxes other than capital gains? This may not be as lucrative as an annual tax exemption, but it would help remove a hurdle to home-ownership.

Note that civil servants are typically not paid so high as to have much cash in hand for the ancillary cost of purchasing new homes, costs which are normally not covered by a bank loan. Tax exemptions such as this one will help reward their daily warrior-like sacrifice for the nation in the spirit of Jizyah.

We can extend this everywhere, from direct taxes for civil servants being at a lower rate geared to criticality of service to the nation - like a big exemption to teachers say, through to the indirect by say making gains from insurance payouts AND INVESTMENTS, tax-exempt for civil servants, encouraging them to take up private insurance to allow then some access to private hospitals, rather than having to rely on public hospitals and clinics only.

Please note that I'm not a tax-cut advocate by any means. However, I tend to think there are a mechanisms to make such mechanisms tax-revenue neutral to the government. OK, the tax exemptions linked to industries like that on home purchases or insurance benefits may be neutral from engendering greater economic activity anyway, but additionally, the government can consider applying taxes to those committed to avoiding public service? I'll leave this open...

Maybe the over-reaching idea here is for some tax experts in government to sit down and study the Islamic morals driven tax laws of old to discover some underlying logic, hence seeing its applicability for the current world. Any finance guys and gals out there even thinking of a Masters or PhD study on these matters perhaps? Would be cool if TAXES of all things could be made so interesting a matter of study given the right dimensions... and ideas...


Dek Mat said...

income taxes in islam is 2.5% yes?

A M Ubaidah S said...

There is some easy confusion around this I feel. In Islam, Zakat is at a 2.5% rate, but Zakat is suppossed to be alms for the needy or less fortunate and is not the same as Jizyah, which is more a payment to exempt people from the National Service of defending the nation of old.

Hence, I do not regard zakat as tax in the secular sense, but more akin to charity, or the portion of tax set aside to welfare services.

In my write-up, I have been careful not to equate tax with Zakat, but with Jizyah. I am not sure though at what rate Jizyah was charged in the past.

I'm happy for your party to co-opt this into your manifesto if you wish - I am not sure if my own party UMNO is as open to ideas not from or/and benefiting the 4th floor and their friends any more.

Btw, like your party's concept ;-)

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