Request for Fatwa on Subsidy and Taxes
Request for Fatwa on Subsidy and Taxes
Subsidies
Based on information from experts on economy and practices of advanced countries such as the UK and the EU, subsidies on consumer goods are detrimental to the local people because subsidies help foreigners more than locals viz its citizens give more assistance to the rich, encourage waste and not encouraging manufacturing mentality. The fact is that all the developed nations have already banned subsidies on consumer goods.
The question is whether Islam allows subsidies because subsidies are not mentioned in the quran, only direct handouts.
Surah Attaubat 9:60 , use “sedekah” in arabic. Charity for some categories, including Fisabilillah.
Surah Yasin 36:47, use “infaq”, without mentioning to whom, meaning for everyone. The other half of the verse, not from Allah, but infidels questioning the giving of money to the poor. It looks as though Allah is directing Muslims to give to the poor only, but more accurate is to everyone fairly. Only infidels will question the giving of money directly to the poor. This question appears trivial but this the reason used by supporters of subsidies instead of giving money directly to the poor or those in need of help, because the poor is already destined to be poor anyway. Giving them money directly, will make the poor lazy.
The problem is to identify what subsidies are. Is not giving money directly also a form of subsidy?
No. A subsidy is partial payment of the purchased item. If the aid is for various kinds of things, like the food coupon in the USA, is not supposed to be called subsidy. Coupons that can be used to buy various kinds of food is a form of money.
If subsidies reach 100%, these are no longer subsidies, they become gifts already.
Therefore, there is a need to make a fatwa on subsidies and the various types of subsidies, so that we and the government do not violate the Islamic law, especially the laws that are clearly written in the Quran.
Maybe there are various kinds of subsidies which are allowed, because they are not detrimental to the citizens. Subsidies on education and health as already practised by some developed nations. Financial help provided can be viewed as subsidies because people need not pay the full educational or medical bills.
However, education and health will not become wasted like subsidies on consumer goods. It is not detrimental to human beings who receive more education or medical treatments, although may not be fair because rich people can afford more education and medical treatments because they can afford them.
To be fair, more people should be provided free education and health services rather than just subsidies. Giving education and medicine apparently has some flaw, but we place compliant to Islam's calls in order to be truly fair.
However, subsidies in any form are still subsidies. There is no mention at all of giving subsidies in the Quran, only giving money directly. The government should transfer money from hiring teachers and doctors to giving scholarships and helping finance medical expenses or insurances for medical and educational needs.
Thus, also other expenses on schools and hospitals. Governmental money for schools and hospitals are transferred to the citizens directly, so people can choose which services they want or willing to pay.
Giving wang directly to the people is more fair because the poor people can get at least the same governmental assistance compared with the rich, not less as it occurs if subsidies are given.
Giving money to the rich is haram. Mufti Kuala Lumpur has given a fatwah at https://muftiwp.gov.my/artikel/al-kafi-li-al-fatawi/3740-al-kafi-1397-hukum-memberi-sedekah-kepada-orang-kaya. It is only allowed(harus) in a rare circumstance in a dubious hadith although the source is from Sahih Buhari. The condition is that the giving to the rich is to encourage the rich to be generous. This reason certainly does not apply to subsidies, because the reason subsidies are given is to reduce the burden of living, not to encourage the rich to be generous, so it is haram.
In SharhSunan Abu Dawood, Al-‘AzeemAbadi said: “Voluntary charity is like a gift; it may be consumed by both the poor and rich.” in https://www.islamweb.net/en/fatwa/51694/. It is to allow the acts of putting water coolers in streets or mosques or distributing dried dates at Iftaar meals. These are gifts to the community as part of Fisabilillah, for spreading the message of Allah and helping the muslim community for FREE, not partial payment as subsidies are.
Also no wastage because the people will not spend more for lessons and medicine unless they are really necessary.
And encouraging the peopleto self-learn and keep themselves healthy so they can get maximum benefits from the governmental assistances which are derived from the people also through taxes.
Subsidy shares - producer and consumer
If you give cash to consumers directly, there is no portion wasted on the suppliers. If the actual price of petrol per litre is RM4 per litre, if we give to users cash directly at the rate of RM2 for each litre of consumption of petrol, the price of petrol to the consumers is only RM2. If it is a subsidy, the money is sent to the producer, the petrol stations, so the tax payers need to pay RM4, or double to get a reduction of only RM2. This is silly and yet widely supported by voters and muslims. http://www.sanandres.esc.edu.ar/secondary/economics%20packs/microeconomics/page_22.htm
Taxes
Sahih International
(2:188) And do not consume one another’s wealth unjustly or send it [in bribery] to the rulers in order that [they might aid] you [to] consume a portion of the wealth of the people in sin, while you know [it is unlawful].
(Surat al- Baqarah : 2:188)
Many scholars use this verse and other similar verses to ban taxes.
Takin people's property is stealing. Taxing just transders wealth to others. Not steal. If transfering wealth is done in a cruel and unfair ways, such as subsidies, then it is forbidden.
Mufti of Kuala Lumpur on 2015 suggests deducting GST tax from Zakat, meaning that he also knows that Zakat is a type of tax.
Zakat fitrah is clearly a poll tax or head tax. Different in name only.
The Saudi and Brunei governments banned all kind of taxes except zakat. However, study what Zakat is in the Quran.
Surah Yasin 36:47, using infaq but not stating percentage, that is it can be as much as necessary.
Surah Attaubat 9:60, sedekah for various uses but also no mention of percentage, but includes fisabilillah.
If you sedekah or infaq, you move your wealth, so these are taxes. The question here is this whether they are voluntary? No. The Quran even treats them as non believers if they fail to pay these taxes.
The important things are the effects of taxes or subsidies. The effects are clear . subsidies waste, taxes reduce waste, because customers just buy what are needed only. These taxes should be transferred to the poor to reduce the burden of living or whatever other purposes that are required.
On the other hand, subsidies transfer taxes to the rich and therefore create wastage and unfairness besides discouragement for self-production.
Subsidies Reduce Salaries
Low Cost of living
Another effect of subsidies is the reduction of salaries. Because of the low cost of living caused by subsidies, workers are willing to work with low salaries. Requests by employees for salary increments are not entertained by employers and the effect is very real in Malaysia in comparison with developed countries such as Singapore.
Brain drain
High salaries in countries that do not practise subsidies push skilled and productive employees into migrating to these developed countries, causing the country practising subsidies to lose skilled and productive employees.
Additional reason is the supposedly more corruption. Indeed, in a state of where poverty is not eliminated like in Malaysia because subsidies are given to the rich not to the poor or unemployed, social problems including corruption will increase.
Extra reason is the lack of the latest and advanced equipment in a country that practises subsidies, because the buyers cannot afford the high prices in global currency. Houses and cars are big because of subsidies in materials and wages including indirect subsidies, in the country practising subsidies like Malaysia, but because buyers of the latest and more advanced items that are more expensive find it very difficult to buy or look for these advanced items. That is, quality of living in Malaysia, or countries practising subsidies cannot beat developed countries with no subsidies, such as Singapore.
Reduction in GDP(Gross Domestic Production)
Reduction in salary , reduction in the value of exports caused by subsidies, cause the GDP of the country to fall. In fact, every country that practises subsidies, are considered as poor nations, from the GDP perspective, when the standard of living are not that much different, just differ in the quality level because of difficulties in looking for the latest and most advanced items.
Excuses for GDP reduction
The reason that Malaysia's so -called lack of GDP is due to unproductive employees does not make sense because the same employee, when moving to a developed state like Singapore, instantly produce more than 3 times GDP from when the employee was in Malaysia. This increase in GDP is caused by the far higher salaries in the developed countries such as Singapore. Maybe there are other reasons but impossible to be caused by workers. The most logical reason is the giving of subsidies in Malaysia.
Reduction in the Strength of the Military and Political Influences
With the reduction in the nationn’s GDP, weapons cannot be made or bought in a large quantity and effectiveness. This weakens the strength of the army of the country practisingg subsidies like Malaysia compared more developed countries that are small but have no subsidies such as Singapore.
Lack of financial strength in the eyes the world also reduces the abilities of a country that practises subsidies to offer financial and military assistances to other countries. That is why it is fair to compare the status of nations by their Gross Domestic Production (GDP).
Fatwa for Subsidies and Taxes
Subsidies needs to be studied with taxes because taxes act opposite to subsidies. Taxes are the negative of subsidies.
Subsidies are not fair to the poor, wasteful and destroy manufacturing. So, taxes are not fair to the rich, frugal and encourage manufacturing. Therefore, taxes are very beneficial to society in general because the poor are the most numerous.
However, in Islam, we are supposed to be fair to all human beings, rich or poor. No matter how beneficial taxes are to society, there must be a limit.
What should be the limit for taxes? Consumption taxes in excess of 100% are indeed very commonn. Taxes on luxury items including cars can be up to 200% in Malaysia. Taxes on hazardous items such as cigarettes can be up to 400%, but better than banning cigarettes.
In fact, unhealthy food such as sugar and cooking oil should be taxed 400%, but in Malaysia it is given subsidies instead. No wonder, there are more patients suffering from diabetes and heart diseases.
Because of all these reasons , the government and politicians require guidances on the teachings of the Quran through fatwas, not only for Malaysian interests, but for all the world. Started in Sabah, but this effort is required all over the world.
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