Zakat-Based Economic Model

If we consider Zakat as the main "tax" of the system, as it was during the time of Prophet Muhammad (peace be upon him), two fundamental mechanisms emerge to cover modern state expenditures. In this analysis, it is important to remember that Zakat is a "designated fund" (money whose spending is predetermined). In this case, the state budget is divided into two main channels: 1. Expenses to be Covered by the Zakat Fund (Social Security). The categories mentioned in verse 60 of Surah At-Tawbah fall under the headings of "Social Security" and "Social Transfers" in modern public finance. * Pension Payments: During the time of the Prophet, those who were old or incapacitated and lacked sufficient savings were directly supported from the state treasury (Bayt al-Mal). * Analysis: If the Zakat-tax system were applied today, pension payments would be covered from this fund not as a "premium," but as a "right to a decent life." Especially, supplementing low pension payments to the minimum subsistence level would be a direct responsibility of the "poor and needy" category mentioned in the verse. * Unemployment and Social Assistance: All expenses of those who lost their jobs or fell into debt (Gârimîn) were covered from this fund, preventing economic collapse. 2. Expenses to be Covered by the General Budget (Infrastructure and Defense): During the time of Prophet Muhammad, expenses for roads, bridges (public works), and defense were covered not only by zakat but also by general public revenues such as "Fey" and "Ganimet." The use of zakat in these areas has been discussed through the category of "Fi Sebîlillâh" (in the way of Allah/for the public good). * Roads, Bridges, and Infrastructure: In Islamic law, "common goods" (water, pasture, fire) and public benefit are fundamental. During the Prophet's time, income other than zakat or the direct labor of the people (imece) were used for such services. * Analysis: In the modern world, while zakat-taxes are used to alleviate poverty, additional fees (motor vehicle tax, usage fees, etc.) are introduced for services such as roads and bridges, based on a "Service Tax" or "User Pays" logic. * Defense Industry Expenditures: The concept of "Fi Sabilillah" (in the way of Allah) in the verse is directly equated with military and defense expenditures in classical Islamic jurisprudence. * Analysis: Ensuring national security, protecting borders, and developing defense technologies can be financed from zakat funds. However, the Prophet encouraged the wealthy to make "extra infaq" (voluntary large donations) to equip the army (e.g., the Tabuk Expedition). Today's equivalent could be "Defense Bonds" issued by the state for strategic projects or private security shares levied on wealth.

Conclusion of the Analysis: When we consider zakat as a "single tax," the state budget takes on a human-centered structure. * The main source for defense and poverty alleviation becomes "Zakat-Tax" (Wealth Tax). * For luxury infrastructure investments (bridges, roads, etc.), the state turns to fees collected directly from those who use the service or to foreign trade taxes. The biggest difference in this system is that the state cannot use the tax (VAT) on the poor's bread to build roads. Instead, it pays for the road from those who use it, and provides the poor with bread from the rich's wealth (Zakat). If we apply the Zakat-tax model from the time of Prophet Muhammad (peace be upon him) to the present day, we can make the following projections regarding the speed and process of improvement in income inequality (Gini Coefficient): 1. Short-Term Effect (1-3 Years): "Shock Improvement" In the first years of the system, the lowest income bracket is rapidly lifted. * Elimination of the Poverty Line: Because Zakat-tax is directly channeled to "those in need," the income of the bottom 20% of society instantly reaches minimum living standards. * Stimulation of Consumption: The money received by the lower income group directly returns to the market (basic food, clothing). This creates a "multiplier effect" in the economy, stimulating local trade. * Relief from Debt Burden: Thanks to the "Gârimîn" (debtors) clause, the financial shackles of the middle and lower classes, who are trapped in a debt interest spiral, are broken.

2. Medium-Term Impact (3-10 Years): "Distribution of Wealth" Since Zakat-tax targets not only income but also idle wealth (cash, gold, unused land) on the back burner, the capital structure begins to change. * Encouraging Investment: A 2.5% (or a predetermined rate) annual tax on idle money encourages capital owners to invest, create jobs, or engage in trade to prevent their money from dwindling. * Equal Opportunities: By funding education and healthcare expenses under the Fi Sabillah (In the Way of Allah) program, the "educational gap" between children from poor families and children from wealthy families begins to close. This accelerates social mobility (upward mobility). 3. Long-Term Impact (10+ Years): "Sustainable Middle-Class Society" It is a historical fact that during the time of Caliph Umar (the period when the Prophet's system bore fruit), there were no people to whom Zakat could be given. The long-term result of this model is **"The End of Class Polarization"**. * Decrease in Gini Coefficient: The Gini coefficient, currently around 0.40 in Turkey and globally (unfair), could be projected to fall below even Scandinavian countries (to the 0.20-0.25 range) with this model. * End of Permanent Poverty: The system not only feeds the poor; it also empowers debtors by providing them with capital (through the Rikâb and Gârimîn classes), transforming them into producers.

The Biggest Obstacle to This Model: "Informal Economy" During the time of Prophet Muhammad, the success of this system was based on transparency and honesty. For this model to achieve the same momentum today: * All wealth (crypto assets, real estate, foreign accounts) must be digitally recorded and transparent. * A technological guarantee (e.g., Blockchain-based distribution) must be provided to ensure there is no favoritism or nepotism in the distribution of collected funds.

In conclusion: When the Prophet's tax logic (Zakat) is applied, poverty ceases to be a "fate" and becomes a solvable "resource allocation problem" within a short period, such as 10 years. Today, Türkiye's social security system is fundamentally based on a method called "Distribution Principle" (Pay-As-You-Go). This system works on the principle that instead of individuals saving money for their own retirement, the premiums paid by the currently working population directly finance the pensions of current retirees. We can summarize the system's operation and current components under the following headings: 1. Distribution Principle (Pay-As-You-Go) Model: In this model, the Social Security Institution (SGK) does not accumulate the premiums collected from employees and employers in a pool, but immediately uses them to pay the monthly pensions of existing retirees. * Active/Passive Ratio: For the system to function properly, the ratio of the number of employees to the number of retirees (active/passive ratio) must be high. While the ideal ratio is 4 employees to 1 retiree, this ratio is currently lower in Türkiye. * Government Contribution: When premium income is insufficient to cover pension payments, the difference is covered by the government budget (treasury assistance). 2. Fund-Based Supplementary Systems: To reduce the burden on the distribution-based system and increase the welfare of individuals during retirement, systems based on the "Fund Principle" have also been implemented: * Individual Retirement System (BES): This is based on voluntariness. The contributions paid by the individual are invested in investment funds and accumulate during retirement. The government provides a 30% contribution to encourage this system. * Automatic Enrollment (OKS): This is a model where employees are automatically included in the BES through their employers. * Supplementary Retirement System (TES): This model, planned to be implemented by 2026, is a more comprehensive fund system integrated with severance pay, where employees, employers, and the state jointly pay premiums. 3. Method of Calculating Retirement Pensions While pension payments are based on a distribution system, the following criteria are used to determine the amount to be paid: * Update Coefficient: Calculated using a coefficient that takes into account the present value of past premiums paid, annual inflation (CPI), and 30% of the growth rate. * Monthly Linking Rate (ABO): A percentage that varies according to the length of employment. * Earnings Subject to Premiums: Your gross salary reported to the Social Security Institution (SGK) while working is the most fundamental determinant of your retirement pension. In summary, while the main retirement pensions provided by the state are currently covered by the premiums of employees, systems such as BES and TES aim to create additional income for individuals through funds accumulated in their own name.

The most prestigious study evaluating pension systems worldwide based on "efficiency," "sustainability," and "adequacy" is the Mercer CFA Institute Global Pension Index, published annually. According to current data for 2025 and 2026, the Netherlands holds the title of the world's most successful pension system. Iceland and Denmark follow closely behind with similar scores. Here are the key features that make these systems "the best": 1. Netherlands (Overall Leader) The Dutch system is at the top due to both the high basic pension provided by the state and the excellent management of mandatory deductions from employees' salaries by professional funds. * Hybrid Model: Formed by combining both public and private sector funds. * Collective Risk Sharing: Investment risks are not shifted onto individuals; funds are managed collectively, and risks are shared across generations. 2. Iceland (Sustainability Champion) Iceland is particularly the best in the world in terms of "Sustainability" (the system's ability to make payments in the future). 

 * High Savings Rate: The contribution rates paid by employees and employers to the fund are very high, creating a massive pension asset. * Late Retirement: The retirement age system, determined in parallel with the average life expectancy, maintains stability. 3. Denmark (Integrity and Transparency) The Danish system stands out for its transparency and the breadth of the social safety net provided to individuals. * Universal Basic Income: All citizens are guaranteed a certain amount of basic pension. * Mandatory Employer Contribution: Almost every employee is automatically included in a pension fund through their employer. 3 Key Factors That Make Systems Successful The common features of these systems, which receive an "A" rating worldwide, are as follows:

Note: In the 2025-2026 reports, Singapore and Israel also received an "A" rating, placing them among the top-ranked countries. Turkey, however, generally ranks low in this index due to its low "sustainability" score.

When we examine the practices during the time of our Prophet Muhammad (peace be upon him), we see that the distinction between zakat and public finance (tax) was not as sharp as it is today; in fact, they were intertwined. At that time, zakat was not only an individual act of worship but also the state's most fundamental source of revenue and the main mechanism of the social welfare system. From this perspective: 1. Social and Economic Integration: In the Age of Bliss, zakat was collected and distributed by the state (Bayt al-Mal). This made zakat a "religious tax" in the sense we understand it today. *Analysis: If zakat and tax are considered the same thing, the primary purpose of taxes collected by the state would be to address income inequality and support those who cannot meet their basic needs. In other words, tax would become a fund collected not just for building roads/bridges, but directly for "ending poverty." 2. Evaluation Based on Tax Base and Rates: During the Prophet's time, zakat was collected on agricultural products (ushur), livestock, and cash/commercial goods. * Analysis: In today's world, positioning zakat as a "single tax" or "main tax" means that the tax burden falls only on capital and production owners, while salaried employees (if below the nisab amount) are protected by the system. This supports an approach that lightens the tax burden on labor. 3. Limitations in Areas of Use The Quran (Tawbah 60) clearly defines 8 categories to whom zakat should be given. * Analysis: When we combine zakat and taxes, a large portion of the state budget should be in the status of "conditional donation." That is, these collected funds cannot be transferred to the general budget and used for defense or bureaucratic expenditures; they should be spent directly on social assistance, debt relief, and public benefit (sabilillah). 4. Balance Between Voluntariness and Control During the time of the Prophet Muhammad, there were zakat officials (amil), and this was a public duty. However, since the essence of zakat lies in the consciousness of "responsibility to God," tax evasion was seen as a "betrayal of trust." * Analysis: Identifying tax with zakat elevates the citizen's motivation for paying taxes from "obligation" to "a social debt and moral duty." This provides an ethical foundation that reduces audit costs.

Conclusion for Today: If we take the Prophet's practice as a model today, instead of saying "Zakat is already a tax," we conclude that "The tax system should be redesigned according to the spirit and justice of zakat." In this scenario, the state should reduce indirect taxes, especially those on basic necessities (VAT/Special Consumption Tax, etc., which also affect the poor), and center a system (the logic of zakat) that will bring large, idle assets into circulation. Verse 60 of Surah At-Tawbah forms the basis of public finance and the concept of the welfare state in Islamic law. This verse definitively limits where zakat can be spent through eight categories. A detailed analysis of these classes from the perspective of contemporary public finance and social policy is as follows: 1. The Poor and the Destitute: In the classic distinction, the poor are those who struggle to meet their basic needs; the destitute are those who have nothing. 

* Modern Equivalent: Those living below the "minimum subsistence level." * Analysis: This item represents the state's "Social Security and Social Assistance" budget. It includes unemployment benefits, disability benefits, and cash transfers to low-income individuals. The system's primary priority is to ensure that no one in society falls below the poverty line. 2. Tax Collectors (Zakat/Tax Officials): These are the individuals who work for the collection, safeguarding, and distribution of Zakat. * Modern Equivalent: The finance and social services bureaucracy.

* Analysis: The mechanism for tax collection and social welfare distribution covers its own costs from within the system itself. This ensures the sustainability of public administration. 3. Mu'allafa-i Qulub (Those Whose Hearts Are to Be Won): These are groups whose hearts are to be won over to Islam or whose negative attitudes towards the state are to be prevented. * Modern Equivalent: Diplomacy, Soft Power, and Public Relations. * Analysis: This is the budget allocated by the state strategically to maintain social peace, gain allies in the outside world, or create public opinion in favor of the country. 4. Fir-Rikab (Those Who Are to Be Freed): The liberation of people under bondage. * Modern Equivalent: The Fight Against Modern Slavery and Human Rights. * Analysis: Although there is no official slavery today, rescuing victims of human trafficking, freeing those forced into labor, or freeing those under heavy debt/dependence falls under this category. 5. Garimîn (Debtors): Those who are unable to pay their debts, especially those who have gone bankrupt or are burdened with an unjust debt. * Modern Equivalent: Individual Debt Restructuring and Financial Rehabilitation. * Analysis: The state intervenes to rescue its citizens (or businesses) who have fallen into debt due to economic crises or misfortunes. This prevents the system from collapsing and offers an opportunity for an "economic fresh start." 6. Fi Sebîlillâh (Those in the Way of Allah): All kinds of good deeds and jihad that are pleasing to Allah.

* Modern Equivalent: Public Services, Defense, Education, and Health. * Analysis: In a broad sense, it is any activity that benefits the general public (public good). It encompasses a wide range, from national defense expenditures to R&D studies for the advancement of science, and the construction of schools and hospitals. 7. Ibn al-Sebîl (Those Stranded): People in dire straits. Those living under bridges, homeless, etc. * Modern Equivalent: Refugees, Asylum Seekers, and Temporary Settlement Services. * Analysis: Supporting individuals who have been uprooted from their country or home and who, temporarily or permanently, cannot access their basic needs (refugees, disaster victims or those who have suffered, the extremely poor, the homeless). General Assessment from the Perspective of the Prophet Muhammad: The way the Prophet Muhammad applied this verse was that he viewed taxation as a process of "returning a certain portion of wealth to the weakest segments of society." According to this perspective: * Limited Authority: The state cannot arbitrarily spend this "zakat-tax" it collects. The preposition "li" (for) in the verse indicates that the ownership of this money belongs not to the state, but to the classes mentioned. * Rejection of Luxury Spending: Palaces, excessively luxurious bureaucracy, or wasteful expenditures are not covered by Surah At-Tawbah 60. * Dynamic Justice: If a society has a high debt problem (Gharimin), the budget is shifted there; if there is an external threat, it is allocated to defense (Fi Sabilillah). In summary, Surah At-Tawbah 60 is a budget law that, in today's terms, is "transparent, targets a specific audience, and focuses on social justice." Through this practice, the Prophet demonstrated that the primary purpose of finance is not to enrich the state, but to sustain society.

The Scientific Governance Model and the Zakat-based economic model should be understood as complementary models, but as a single, unified model. A system that will absolutely work in the face of difficulties, or in the face of pressure from trusts, powerful lobbies, or combined corporations—that is, against the leading figures of society or the self-serving bloc of power—cannot be proposed. Because responding to the fascist influence of the large and oppressive lobbies of the neoliberal economy with an equally oppressive force, and forcing the system to be implemented, inevitably leads to falling into the same pit. It is erroneous to expect the proposed system to work despite the self-serving insistence of individuals. What is proposed here is a system aimed at ensuring income equality and governance justice. To suppress those who insist with counter-insistence means to inevitably create internal conflict at the slightest weakness in the system or society. The cornerstone of a peaceful society is income equality. What can achieve this is the smoothest possible governance system. Human weaknesses, bribery, and nepotism in hiring decisions mean that societal problems become unsolvable. It means rendering the economic system and the justice system dysfunctional.