The national budget centers on accounting—where the state will generate revenue and where it will spend it. Although the philosophy of the budget is to ensure equitable distribution of wealth and guarantee citizens' fundamental rights. However, in the current capitalist economic system, the budget often becomes a tool to protect the interests of a handful of capitalists and trap marginalized people in a web of taxes.
At this juncture, Islam's state financial management system, known as Baytul Mal (state treasury), emerges as a timeless alternative. Its core lies in divine trusteeship and pure human welfare.
In modern welfare states, the primary goal of the budget is to achieve macroeconomic stability and GDP (Gross Domestic Product) growth. However, it is often observed that even as growth increases, the gap between the rich and the poor widens geometrically.
Islam addresses this artificial inequality by stating, 'So that wealth does not circulate only among the wealthy among you.' (Surah Al-Hashr, Ayah: 7)
This fundamental principle of Islamic economics is the basis of Baytul Mal. Instead of imposing indirect taxes (VAT) on the general public, Islam has made 'Zakat' and 'Ushr' (a portion of the crop) the primary sources of income from the surplus wealth of the rich, so that wealth flows from top to bottom.
During the golden age of Islamic history, especially during the era of the 'Four Caliphs', Baytul Mal was a well-organized institutional form. Baytul Mal also had specific revenue sectors, which were distributed systematically.
Imam Abu Yusuf writes that the main sources of income for Baytul Mal were Zakat, Ushr, Khumus (one-fifth of mineral and war-acquired wealth), Kharaj (land revenue) and Jizya tax. Among these, the Zakat sectors were completely specific and could not be spent on any other general state development or administrative work. (Kitab-ul-Kharaj, page: 21-24, Dar-ul-Maarif, Cairo, 1979)
Just as the state has to take internal and external loans to meet the 'budget deficit', which indirectly causes inflation. But the beauty of the Baytul Mal system is that one part of it (Zakat and Sadaqa Fund) is always dedicated to the social security of the poorest people in society. As a result, even if there is a deficit in the main budget of the state, the marginalized people never go hungry.
Nezatullah Siddiqi shows that in Islam, tax or revenue collection is only valid when it is for the direct welfare of the people and is done temporarily when the normal sources of Baytul Mal are insufficient; otherwise, there is no opportunity in Islam to impose oppressive taxes on the people. (Dr. M. Nezatullah Siddiqi, Role of the State in the Economy: An Islamic Perspective, page: 68-70, The Islamic Foundation, Leicester, 1996)
The era of the second caliph Umar (RA) was quite progressive and far-sighted in terms of wealth distribution from the state treasury. He was the first in Islamic history to create a 'Diwan' or state register book, which was essentially a specific budget and distribution plan.
He arranged regular allowances from the Baytul Mal funds to ensure the minimum standard of living for every citizen, whether Muslim or non-Muslim. There were even allowance provisions from Baytul Mal for newborn children. (Ibn Jarir Tabari, Tarikhul Umam Wal Muluk, 4/220, Dar-ul-Kutub-il-Ilmiyah, Beirut, 1987)
Once, while on a tour of Syria, Caliph Umar (RA) saw an elderly Jewish citizen begging and exclaimed, 'We took Jizya (tax) from you in your youth, and now we are neglecting you in your old age! This can never happen.'
He immediately instructed the officer in charge of Baytul Mal to arrange permanent allowances from Baytul Mal for the elderly and all such incapacitated people. (Abu Ubayd Al-Qasim Ibn Salam, Kitabul Amwal, 46, Dar-ul-Fikr, Beirut, 1988)
After the budget is passed, it is seen that a large portion of the state funds is wasted on the luxury of bureaucracy, unjustified projects and VIP culture. However, every penny of Islam's Baytul Mal is the people's deposit, for which the ruler has to account to Allah.
The fourth caliph Ali (RA) warned in a letter to the Persian administrator Ziyad Ibn Abihi about the expenditure of state wealth.
He writes, 'I swear by Allah, if I find out that you have appropriated any part of the Muslims' state wealth (Baytul Mal) for your own benefit, I will take such action against you that will leave you destitute, crushed under a heavy burden and disgraced.' (Sharif Raji compiled, Nahjul Balagah, page: 424, Dar-ul-Kutub-il-Lubnani, Beirut, 1971)
Islamic economist Omar Chapra shows in his research that the foundation of budget formulation in an Islamic state is 'Adl' (justice) and 'Ihsan' (benevolence). The ruler here is not the owner of wealth, but merely a trustee or guarantor. (Dr. M. Omar Chapra, Islam and Economic Development, page: 45-47, Islamic Research Institute, Islamabad, 1993)
A large portion of our state revenue goes towards paying interest on loans and unproductive sectors. To break this cycle, structural changes are needed in the overall budget philosophy.
Islam's Baytul Mal system teaches us how to institutionalize Zakat and Waqf (assets dedicated to public welfare) as a complement to the national budget.
According to Islamic economists, if developing countries can use a portion of their total GDP through Zakat and Waqf management systems to directly alleviate poverty, the huge burden of social security on the government's revenue budget will be reduced. (Dr. M. Kabir Hassan, Islamic Finance: Principles and Practice, page: 112-115, Edward Elgar Publishing, UK, 2013)
Islam's Baytul Mal system shows us a wonderful balanced path of humanity, good governance and trust. The budget should not be a legal document to make the rich richer; rather, its main goal should be to establish the right to food, clothing, shelter, education and healthcare for every citizen.
