In the first place, we must differentiate between Zakah and tax. Zakah has a spiritual nature and has its roots in the revelation, whereas secular taxes are imposed by the civil or secular authority.
Secondly, the function of Zakah is clearly defined as catering for eight categories, whereas taxes have much wider applications.
Thirdly, tax collection depends on the power and skill of the authorities, which induces many people to seek to avoid, if not evade payment. Zakah, being a religious duty, has the consciousness of the believer as an inducement towards payment. There is an invisible collector of Zakah living in the heart of every Muslim. You can cheat the government, but how can you cheat Allah? For this reason, Zakah remains an obligation on the Muslim.
There is no excuse for Muslims to withhold Zakah. The aim of Shari`ah is to help the poor and needy to be self-sufficient. It is not to encourage the culture of dependence. Islam abhors those who make begging a profession. The Prophet Muhammad (peace be upon him) once bought an axe for a poor man to collect fire wood to sell and feed himself and his family. This example should inspire the Zakah authorities into projects that affect the fundamental solution of poverty. It should fund training schemes to make the skills of the poor more marketable. It should also finance projects that give jobs and supply needed goods and services such as textile factories, machine tool manufacture and cheap housing.
Zakah Is a Solution of Poverty
Modern economics shun aid which meets immediate consumption. There are, of course, cases where the need for food and other consumer goods is too urgent. But Zakah funds should plan to achieve the aim of the Shari`ah, that is to find a long term solution to poverty and dependence. In this respect, I would like to differentiate between Zakah Al-Fitr (Zakah for breaking the fast) and Zakah Al-Mal (wealth tax). The former should be exclusively for consumption as the Prophet (peace be upon him) advised us to bring joy and plenty to every household on the occasion of `Eid Al- Fitr. But the latter should be an allocation of long-term projects.
The imposition of an organized Zakah collection system should be the objective of every Islamic state, both for the benefit of social peace and religious fulfillment. This might create a problem where Muslims live side by side with non-Muslims. It would not be just to charge the Muslim with both civil and religious taxes while the non-Muslim neighbor pays only one tax. In the past, non-Muslims used to pay Jizyah which was the counterpart of Zakah from Muslims.
Economy occupies a large part of our life. We cannot pass even a day without undertaking any economic activity, whatever it is. Even eating or sleeping for a while comes within the purview of economics. As for example, why do we eat? We eat to survive. Why do we survive? We survive for work. Why should we work? We work just to earn our bread. How do we get bread? We get it either for money or by producing. Therefore, both money and production are the two most important parts of economy. The Glorious Qur’an and Sunnah involve a lot of texts that exhort for charity, Zakah and doing works that benefit human society. If the system of Zakah in Islam is understood well and properly it verifies the divine nature of Islam. Truly, the system came from none other than the Almighty Allah, who created everything including people and the universe. Manmade theory may be wrong. But, there is no slightest degree of doubt that Allah’s System is perfect and beneficial for all.
Zakah and the Prosperity of Human Society
If the concept of Zakah is faithfully implemented, it can solve the current economic problems of not just Muslims, but also problems of the whole world. The economic problems of Muslims would be solved if we start practicing, in earnest, this much-neglected pillar of Islam.
Zakah: the First Universal Welfare System
The achievements of the Prophet Muhammad (peace be upon him) were based not on ephemeral but on the permanent values of the Glorious Qur’an. He brought about the greatest revolution, even an economic and political miracle, in human history. In a very short time after the prophet (peace be upon him) migrated to Al-Madinah and implemented the system of salah and Zakah, the economic condition of the people changed and improved immediately.
The Prophet Muhammad (peace be upon him) is reported to have said: “If a single person were to sleep hungry in a town, then Allah’s protection is lifted from such a town.” (Ahmad) This hadith emphasizes that no one (Muslim or non-Muslim) under this system should go hungry. Thus, the Zakah system created the first universal welfare system in human history. It also gradually transformed the existing slave-based economy to a universal welfare-based economy. By the end of Prophet Muhammad’s period, the entire Arabian Peninsula enjoyed economic as well as political security. In fact, we abandoned the system implemented by our Prophet Muhammad (peace be upon him). Consequently, common Muslims have continued to live in poverty and suffer intergenerational economic misery. Islam’s system of Zakah has nothing to do with this sad state of affairs.
The effective control of Muslim land and its vast resources have slowly passed into the hands of the enemy, while we are exhorting ordinary, working-class Muslims to give Zakah. While thousands of children die from malnutrition and lack of medicine, religious Muslims spend millions of dollars on food and decorations to celebrate the departures and arrivals of Hajis (pilgrims) in hundreds of cities and towns around the world. Many religious and rich Muslims firmly believe that performing multiple Hajj and `Umrah is the highway to heaven. While many of the Imams and religious leaders join in and participate in the celebrations of the rich by praising their religiosity, all the while they exhort the poor to be patient and accept their predetermined fate.
When will we implement the economic system of Zakah as effectively as was demonstrated by our Prophet Muhammad (peace be upon him) there will be no poor and needy.
Role of Zakah in Present Days
Zakah is generally translated as charity or poor-due, but Zakah with its root Zakw, which means growth and development. Zakah ultimately leads to growth and development of all human beings; it removes the need for charity or poor-due in the long term. Zakah not only leads to the economic progress of individuals and all human beings, but to their spiritual progress as well.
 http://ireland.iol.ie/~afifi/Articles/Zakah.htm (last accessed on 29-82013).
 http://kantakji.com/fiqh/Files/Zakah/143.txt (last accessed on 29-82013).
 For a detailed discussion about the system of Salah, see a two part article in MONITOR, pages 6-10, September/October 1998, and pages 7-12, December1998/January 1999.
 http://islam-understanding.blogspot.com/2004/10/role-of-Zakah-in-islam.html (last accessed on 29-82013).