Zakat On Salary And Professional Income

Question

Asslam-o-Alikum,

This is to seek clarification on opinion of respected Mr. Javed Ahmad Gamidi on zakat on salary and professional income, which he derived mainly through an analogy with zakat on agricultural production.

I requesta response on below three concerns, which seemingly prohibits the creation of analogy between agriculture production and income from professional services/salary and thus levy of zakat on such services:

1. Dissimilar Nature of Agriculture Production and Professional Services Study on zakat on agriculture production evidently reveals that basically zakat is levied on agriculture output itself in a quantitative manner rather than on its realizable or realized value. Hence, sales price is not relevant for calculation of zakat on production. Whether realized or not zakat is collected from physical produce at time of harvest. Once zakat is paid on a produce it can be stored for years without paying any further zakat on that production. However, if it is sold and money realized, zakat is payable on money on which year has passed. Zakat on produce shall however be paid if it is acquired for trading in the nature of business merchandise with that money and year has lapsed. (Summarized concept based on Imam Malik's Al-Muwatta) Comparing the above with income from professional services, a clear distinction in the nature of two heads can be marked that, unlike agriculture produce, services lack physical or tangible output from which a zakat can be collected. If monetary value of services is made a basis for calculation of zakat, it contradicts with the very nature of agriculture production where monetary value of produce is irrelevant, hence precluding us from drawing an analogy between the two . Further, service is merely a form of labor and one of the factors of production, not a production itself. There is no zakat on factors of production rather it's the actual physical output. Physical significance of production for zakat is further evident from the fact that there is no zakat on perishable fruits, vegetables and herbs. It reinforces the understanding that zakat is on physical production rather than its realizable value. If this notion was not correct, sales value of perishable produce could have well been assessed and paid through money or some other non-perishable produce of equal value. Further there could have been a zakat on these produce upon sales if needed at all, no such arrangement was made. Non collection of zakat on perishable produce signifies that since such produce is not collectable nor distributable so no zakat was imposed. The same analogy applies to professional services i.e. they are non-collectable and non-distributable and hence non-zakat -able.

2. Burden of Labor and Factor of Nature's Support Labor aspect in Professional services differs greatly from agricultural produce. Professional services output continues as long as the person is at work. As soon as work stops, production stops (linear relationship). This is not the case with agriculture, where though labor is required but its major role is played by nature to bring that produce to life. Agriculture produce is underpinned by a great deal of element of 'freebie' from nature. Output of agricultural produce is generally much higher than the input of time and energy, e.g. small number of grains could produce hundreds or thousands of new grains. While in case of services, output is restricted to the amount of time and energy input without observable nature's support. Such natural support is the main factor which distinctly set professional services apart from 'labor only' category of agriculture production. As a an evidence of recognition of human effort for zakat purposes, it may well be observed from the pattern of zakat rates ( 5%, 10% and 20%) that any increase in human burden (cost or effort) lowers the zakat level and vice versa. Now professional services, though may ostensibly and conveniently be classified under 'labor only' category, yet burden of output for services is highly dependent upon human effort rather than the nature as in the case of agricultural produce. Hence based on subtle pattern embedded in zakat rates, professional services may not simply be considered a 'labor only' activity similar to agriculture and thereby attracting 10% zakat levy. This either signifies a need to deduce a new rate of zakat for income from services, corresponding with human burden without nature's support, if at all to be levied or be content with the idea that income from services was never intended for zakat due to its different nature and/or burden of output.

3. Risk of Bid'ah Zakat, as we all know very well, is an obligatory ibad'ah just like prayer, fasting etc. Extending the scope of this ibad'ah based on principle of modern era developments, appears to be unconvincing and rather entails the risk of creating a bid'ah. Concept of salaries and professional services is not a novel idea of modern economics and was well known at the time Prophet (PBUH) and four rightly guided Caliphs. The argument that since such services were not the major part of economic activity in those times and hence not included, appears to entail a fallacy. It may well be inferred that, in the very presence of services in those times, had the intention not been there to exclude them from zakat, a guiding principle towards the level of exemption would have well been provided. Hence based on the highly dissimilar nature of agriculture production and professional services, drawing resemblance of the two to suggest an additional zakat head is not only akin to comparing apple with oranges, it severely entails the risk of creating a bid'ah by enhancing scope of an obligatory act.

Allah knows the best


Answer

Thanks for your detailed analysis of the subject. Although the normal practice in the Exploring Islam website is to reject very long questions but I thought it would be beneficial for others to read your analysis and learn from it.

My very quick and straightforward answer to your argument is very simple:

This is a matter of ijtihad (personal view based on deduction). If you are convinced by your analysis then you are obliged to follow its implications. At present I feel more comfortable and convinced with the view that you are arguing against.

My detailed answer is as follows:

I do not consider your analysis correct. The reason is that in your analysis you have used some evidences as absolute rules of shari'ah. This is while the evidences you are referring to are themselves mere fatwas and belong to feqhe and not shari'ah. In other words, some of the specifications of zakah that you are referring to as proof, themselves are not coming from the prophet (pbuh) and are based on personal opinions.

Also your analysis is based on some assumptions that to me are not valid. I will first explain these and will then address the core of the issue that you raised:

A. "Once zakat is paid on a produce it can be stored for years without paying any further zakat on that production."

The above is not coming from shari'ah. This is a matter of opinion. In my view, a stored product is part of wealth and after passing of year zakah is due on it. I can assure you that this view is not specific to me or my colleauges or teachers.

B. "Physical significance of production for zakat is further evident from the fact that there is no zakat on perishable fruits, vegetables and herbs."

'No zakah in perishable fruits, vegetables and herbs' is not the official agreed upon view of the jurists. For instance Imam Abu Hanifa considers anything that is planted and harvested for profit to be subject to zakah and does not consider non-perishability as a condition. Al-Ghardhawi writes in agreement with Abu Hanifa:

"The view of Abu Hanifah seems to be the strongest. It suits the general objectives of zakah and the justice of its implementation as expressed in the texts of Qur'an and Sunnah. We must also remember that this is the opinion of several great scholars such as 'Umar bin Abd al Aziz, Mujahid, Hammad, Daud, and al Nakha'i. The few sayings that talk about four food items are either munqati' (interrupted) or weak. Even if one were to accept the sayings, the restriction to the four items can be interpreted as a mere reference to items present at the time of the Prophet."

(Al-Feqh al-Zakah, p. 181)

C. "Further, service is merely a form of labor and one of the factors of production, not a production itself."

As one whose profession is in production and organisational studies and research I can assure you that the above view belonged to pre 80s and is now totally refuted by the experts. In the present day terminology, product refers to both goods and services. In fact according to the latest findings of researchers in this area, we are now living in an economy where the only basis of exchanging values is service and goods are only means to facilitate the service. If you are interested I encourage you to read about the "Service Dominant Logic" and its principles in the Marketing discipline.

Further, al-Ghardhawi writes in fiqh al-zakah (p.54):

"Shafi'ite, Malikite, and Hanbalite jurists consider services as mal. According to them the possibility of acquisition is not a condition; rather, the condition is the possibility of obtaining the source of mal."Al-Ghardhawi writes in fiqh al-zakah (p.54):

D. You wrote: "Concept of salaries and professional services is not a novel idea of modern economics and was well known at the time of the Prophet (PBUH) and four rightly guided Caliphs."

Abd al Rahman Hasan, Muhammad Abu Zahra and Abd alWahhab Khallaf, three of the contemporary great researchers in the area of Islamic economy and zakah stated in their lecture in 1952:

"We know of no case similar to that of zakatability of income from labor and professions in existing jurisprudence." (Halaqat al Dirasat al Ijtima'iyah, p. 248).

It is interesting that al-Qardhawi in his book al-feqh al-zakah objects to the above statement and to bring counter evidence writes:

"A group of Companions believed in the zakatability of earned income. This includes Ibn 'Abbas, Ibn Mas'ud, and Mu'awiyah. They are followed by a few jurists, such as al Sadiq, al Baqir, al Nasir, and Daud. (al-fiqh al-zakah, p. 252)

What I see in the above statement of al-Qardhawi is in fact more support for the argument that he objects to. The expression "a group of companions believed in zakatability of earned income" reveals that 'earned income' was not a major part of the economy at the time of the prophet (pbuh) otherwise (like the example of agricultural product) we would have plenty of evidences originated from the prophet (pbuh) on how to deal with zakah of earned income.

If as you wrote, the concept of salaries and professional services was well know at the time of the prophet (pbuh) then what is the reason that there is such an extensive debate and disagreement about the zakah of these items of production? Why is it that a great contemporary Muslim scholar like Sheikh Muhammad al-Ghazzali calls for collective scholarly research on this subject? (refer to Qardhawi's feqh al-zakah, p.264)?

I do appreciate that at the time of the prophet (pbuh) too there were activities that would lead to what today we call salary. However, as I mentioned above, this is in no way comparable with the service dominant society that we are living in today. To use a few cases of salaried income in the very preliminary economic society of Arabs as a basis to generalise a rule for the service dominant society of today results in major illogical analogies.

Also please note that unlike the ruling on agricultural products that was firmly established among the companions and therefore became part of the Established Sunnah, the narrations about what to do with sources of income that could be called 'salary' at the time are Ahad (individual) narratives and therefore, not fully reliable and firmly applicable (قطعی ودال).

E. You wrote: "(in agriculture the) major role is played by nature to bring that produce to life. Agriculture produce is underpinned by a great deal of element of 'freebie' from nature. Output of agricultural produce is generally much higher than the input of time and energy, e.g. small number of grains could produce hundreds or thousands of new grains. While in case of services, output is restricted to the amount of time and energy input without observable nature's support. … burden of output for services is highly dependent upon human effort rather than the nature as in the case of agricultural produce."

The above comparison seems to be a crude generalisation based on a personal opinion. I think a farmer may not fully agree with what you are implying here. It seems like you are suggesting that while agricultural production is easy and guaranteed this is not the case with those employed in services. It seems like you are considering the nature to be 'a reliable source of income' for the farmers and argue that a service employee does not have such 'reliable source'.

A farmer who has just lost his product due to bad weather can argue quite emotionally that one who works on a salary based job has a 9 to 5 working hour, weekend, holidays, vacations and a guaranteed income into his bank account at the end of every month (plus many other company advantages). This is while he (i.e. the farmer) has to attend to his farm and do hard working with no limited hours or days to make sure the crop will come about at the season while worrying whether the weather is going to be easy on him that year. For a farmer, the service company in which a person is employed may be seen as a more supportive and reliable 'source of income', compared to nature.

Your comparison of output/input in between agriculture and employment job too is not on a fair basis. Output/input of a farm may be perceived as higher than output/input of an employee, if we compare them at two different points of time. However in a long term comparison, again, I do not think that a farmer will agree with you.

It is beyond the scope of this website to go into more detail or write with professional terms about this. I encourage you to read reports on productivity indices in agriculture.

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After the above explanation of what appears to me as false assumptions or generalisations in your analysis, allow me to directly address the core part of your analysis, that is, the basis of the view on zakah of salary that is gained in professional services:

With the above points in mind, the main objection that remains in your analysis is that zakah on agricultural products is applied to the product itself while the zakah on professional services is on their monitory value.

You are clearly making your above argument based on a bottom up approach, where you compare two products and since you find them different you conclude that same principle cannot be applied to them.

This approach, although may result in correct conclusions at times, in general is not a very reliable approach. The reason lays in the fundamental and structural difference of economy and production means at our time compared to 1400 years ago in Arabia (as mentioned above). Given this fundamental difference, a bottom up approach may result in erroneous conclusions. This is because we will compare production tools without appreciating the economical context in which these tools are/were rooted in.

Accordingly, the approach that I prefer for this case is a top down approach. I tend to derive what I consider to be the principle and then apply it to different cases. In this way we can make sure or at least do our best to take into the account some of the fundamental differences in our analysis.

The guidance of the prophet (pbuh) on agricultural product in my current understanding is not a ruling specific to only agricultural products. It is a ruling that reveals a principle. This principle is applicable to all kinds of products, whether it is actual product or its monetary value. The principle is: "less zakah is due on the added value that is achieved by recruitment of both main sources of production, that are capital and labour."

You are right that service products are often not tangible, however to consider tangibility as the condition of zakah is only an assumption. There is something deeper than tangibility that in my view leads to zakah and that is added value. Both agricultural products and service products bring added value to the market. It is this added value that puts both the provider of the agricultural product and the provider of service product in the position of gain, which then brings the obligation of zakah to them.

In deed if services where tangible and it was possible to count them then zakah would have applied to that tangible element but as you said this is not the case. This however should not stop us from estimating a quantity for the produced service based on its monetary value.

Therefore in my current understanding, the same rates of 5% and 10% apply to all kinds of gain through production. Accordingly, an employee who receives salary, needs to pay 10% of his salary as zakah due to the fact that he is only using one of the factors of production. According to our understanding, if the employee is already paying tax to the state then that may be considered as zakah and only the balance needs to be paid (if his due zakah is more than the tax that he is already paying).

If the above understanding is rejected, then it should be replaced by one of the following three contesting options:

I. No zakah is due on salaries:

This not only goes against the very concept of zakah (that is supposed to be an obligation on our gain to make it pure) but will practically lead to the situation where the vast majority of the society will not have to pay zakah while those who are not benefiting from modern ways of life (farmers, owners of livestock) will have to pay zakah.

II. 2.5% is due on salaries:

This, which seems like a popular view, looks at salary as wealth. I fail to understand how the monthly salary of an employee can be considered as his wealth. Also the same problem as above again applies, where the vast majority of the society will pay only very little as their zakah while high rates of zakah apply to those who are not benefiting from modern ways of life (farmers, owners of livestock).

III. Agree with the above principle but the 10% rate needs to be revised:

One argument can be that while salary should be treated like agricultural product, a different rate needs to be introduced for it. This is because the 10% rate for agriculture was for the case of Capital only production while salaries are Labour based production.

At present I do not feel that such adjustment is necessary and believe that 10% zakah is a fair rate for the situation where only one of the sources of production is recruited (no matter if it is Capital or Labour). However I also appreciate that there might be some basis to argue for a new rate of zakah for the case of production by Labour only. I therefore keep my mind entirely open on this in case I see a strong argument for it.

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As for your concern that zakah is ibadah (act of worship) and extending its scope can amount to bid'ah (innovation) please bear in mind that we are not extending the scope of zakah. We are simply applying the principles of zakah at our time. This is what almost every jurist has done as it can be read in detail in their books. The very popular understanding that salary should be treated as wealth and therefore only 2.5% zakah is due on it (with which I disagree) is based on the same thing, that is, applying the principles of zakah at our time. In other acts of worship too we sometimes need to apply principles to the new situations and this too is not extending the scope of the obligation.

Please also bear in mind that although zakah is indeed an act of worship, it has a major difference with other acts of worship like prayer and fasting. While prayer and fasting is in between a person and his Lord, zakah is in between a person and his society and through this relationship we do an act of worship towards the Almighty. As the society changes we will have no choice but to apply the principles to the new situation. If we do not do this we will soon end up with an understanding from religious directives like zakah that is irrelevant and alien to the society that we are living in.

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