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Iqbal & Islamic Taxation Model  

Huzaima Bukhari & Dr. Ikramul Haq

In this article, we are highlighting the ideas of great thinker, philosopher and poet, Allama Muhammad Iqbal[1], on economics. He is popularly praised and acknowledged for presenting Tasawar Pakistan [Concept of Pakistan] and as Hekeem ul Ummat [Messiah of Muslim Ummah] but little has been written about his work titled, Ilm al-Iqtisad, written way back in 1903—a pioneer work on economics in Urdu.

According to Abida Mubashar[2] This was Iqbal’s first book as treatise on economics and one of the earliest Urdu books on the subject. It was written at the behest of his teacher, Thomas Arnold. In this book, he defines economics and discusses its relationship with other disciplines, confronting issues such as equitable growth, the distribution of wealth, spending, consumption and population. This confirms beyond any doubt his preoccupation with social issues, discussing for instance the importance of education in improving the adaptability and confidence of workers and the need to discourage polygamy and teenage marriages to control population.

Dr. Khawaja Amjad Saeed, a renowned expert in the fields of finance and economics, wrote that “Iqbal, the great thinker of Islam, was the first economist of the Indo-Pakistan subcontinent to raise his voice against the exploitation of Muslims by domestic and foreign classes controlling the means of production. It was not an easy task to open one’s mouth on such matters in the late nineteenth or early twentieth century against foreign imperialists who held Muslims responsible for the War of Independence (1857), and clamped censorship and other restrictions on speeches and writings. Yet Iqbal picked up courage to expose the designs of the alien rulers working under the cloak of “Imperial Liberalism” even when he was only a student at the Government College, Lahore, and used to recite his poetry in the annual gatherings of the Anjuman Himāyat-i Islam. In the beginning he composed his verses in the traditional low key but gradually he changed his tune until his thunders rocked the British Empire and finally ripped open the Imperial Crown glittering with the Koh-i Nūr snatched from the Muslim Emperors of India”[3].

According to Fateh M. Chaudhri, former Adviser to The World Bank, “Ilmul Iqtisad is a highly valuable, historic and unique book that has maintained its usefulness even today. Economic and finance were not of Allama’s central interest when compared with his tremendous pull towards philosophy, politics and legal subjects. It is, however, clear from this book that the Allama maintained an abiding interest in the social and economic uplift of the masses, especially the poverty-stricken Muslims in the subcontinent. In the letter of May 28, 1937 to his friend Muhammad Ali Jinnah, Allama Iqbal posed a deeply disturbing question, “how the Muslims of the subcontinent can escape the poverty trap”. Allama Iqbal clearly recognised the internal reasons (money lenders and capitalists) and external factors (British imperialism) behind the plight of the Muslims. And, these observations of Allama Iqbal had a powerful influence on the Father of the Nation whose relentless efforts and brilliant articulation ultimately changed the map of the world by giving us a country in 1947[4].

The great literary critic and scholar, Muhammad Ali Siddiqui very aptly observed that “Allama Iqbal, as we know, was against the exploitative tendency of capitalism. We would like to trace the development of corporate capitalism in order to see what Allama Iqbal had to comment on this cancerous development. Globalization means shutting out possibilities of economic growth for the third world. It has been creating virtual fences to shut our people of schools, hospitals, workplace, farms even houses & communities. Mass privatization and deregulation have bred armies of locked out people, whose service are no longer needed, whose life style are written off as “backward” whose basic needs must go unmet. These fences of social exclusion can discard an entire industry, and they can write off an entire country “as happened in Argentina”, some time ago and now being reversed by new coalition government headed by Chavas. Take the example of Africa where we find that a whole continent finds itself exited to the global shadow world, off the map off the news[5].

It is unfortunate that books, taught in schools, colleges and universities of Pakistan, do not contain excerpts from great speeches on budget delivered by Allama Iqbal in the Punjab Legislative Council [1927-28 to 1930-31]. These are not even posted at the website of Senate, National Assembly and provincial assemblies so that present day’s legislators can learn from the quality and depth of ideas of Allam Iqbal on important economic and taxation issues. His two historical presidential addresses of Allahabad (December 29, 1930) and Lahore (March 21, 1932) are of significant importance and present outlines of the strategy for his economic thinking that it hardly discussed by our elected representatives, economists and businessmen. The main reason of our backwardness of Muslim world as a whole and Pakistan in particular is lack of research to evolve their own economic and taxation models as stressed by Allama Iqbal in his books, poetry and speeches.

Dr. Pervez Tahir, renowned economist and ex-Chairman Planning Commission of Pakistan, in his scholarly article[6], elaborated the importance of work done by Allam Iqbal in the field of economics. He writes:

Immediately after his M.A. in March 1899, he secured the position of McLeod Punjab Arabic Reader at that College. The appointment became effective on 13 May, 1899. His job description included, among other things, the teaching of economics to the students of Bachelor of Oriental Learning (B.O.L.) in Urdu and translation of English and Arabic works into Urdu. As Iqbal wrote in the autobiographical note of his second published book, the doctoral dissertation submitted to Munich University: “After my M.A. I was appointed McLeod Arabic Reader in Punjab University Oriental College where I lectured on History and Political Economy for about 3 years” [Iqbal (1908)]. The Proceedings of the Syndicate of the Punjab University dated 17 January, 1901 indirectly confirm Iqbal’s teaching responsibilities by referring to alternative arrangements made during a leave of absence. The Proceedings state: “That during the absence of Sheikh Muhammad Iqbal, M.A., Maulvi Feroz-ud-Din, B.A., should be engaged to teach the class in Philosophy one hour a day, and Lala Oudh Narain, B.A., classes in History and Political Economy two hours a day . . . .” In teaching at the Oriental College, the required textbook was Fawcett (1888).1 The translation part of his job was performed by bringing out an abridged urdu version of the popular American textbook on political economy by Walker (1888). The Oriental College Report for 1901-02 confirms translation of Walker’s book and a new work on political economy under preparation [Baqir (1977), pp. 31–35].

…..The hard work with which Sheikh Sahib has written this book and the ease with which he has expounded the principle of economics, can be judged only by those who keep getting the chance of reading such books. Besides the exposition of the principle, the author has made quaint references to the present socio-cultural, moral and economic conditions of India. The study of these broadens the perspective of the reader and he is encouraged to take an independent view of the economic problems. What has been written on the nature of money has a particular logical framework, which besides being rationally satisfying throws a novel light on some important issues. We hope that this valuable addition to the fund of Urdu literature would be viewed as praiseworthy and its problems studied to the extent deserved, because the future fate of India largely depends on her present economic conditions. The time now demands that the public shift its attention from lighter literature to those books whose subject it is to examine the practical life of man and his socio-cultural conditions. The book is priced at one rupee and is available from the author.” There is thus no doubt that the book had been published by December 1904 [Khawaja (2000), pp. 60–62].

Very few people know that Allama Iqbal delivered a speech on the resolution regarding application of the principle of assessment of income tax to the assessment of land revenue on February 28, 1928 in the Punjab Legislative Assembly. This speech shown how well versed he was in tax matters, an area always considered very complicated, and in respect of which even the great mind, Albert Einstein said: if there is something in this world that is difficult to understand, it is income tax.  

It is an undeniable fact that the majority of Muslim world is faced with serious problems of income inequalities and injudicious distribution of wealth amongst the various segments of society—a fact that Allama Iqbal raised as early as in 1903. Even in the oil-rich countries, the divide between the poor and the rich is substantially wide. The women get a negligible share in available resources, thus keeping them in a perpetual state of economic backwardness. It is unfortunate that even in the wake of post colonial period, Muslim rulers and thinkers have failed to evolve a commonly-accepted equitable tax system in the light of Quranic injunctions and taking guidance from Sunnah to meet the requirements of the present day world. This point was highlighted by Allama Iqbal in his poetry at various places. On the contrary, in the name of Islamic mode of financing more room for exploitation has been created and much harm inflicted on the common man.

The so-called Sharia-compliant instruments with the exception of a few, prevalent in the existing banking system are in substance, nothing different from normal financial transactions. Mere change of nomenclature is nothing but eyewash. The only additional feature is that Ulema get their due share in exploitation by endorsing these instruments under self-created fiqa. It was for this reason that great thinker and scholar, Allama Iqbal, stressed the need for ijtahad.Since the Muslims all over the globe failed to do this, all the leading Western banks initiated Islamic banking (sic) in the Middle East in the 1960s and soon spread its vicious, exploitative tentacles all over the world, finding it more profitable as compared to other exploitative banking instruments aimed at robbing the poor and benefitting the rich. We keep on remembering Iqbal and read his poetry wherein exploitation of all kinds is denounced, yet in practice we do little to change this oppressive system. On the contrary, many of our Ulema extend support to it as Iqbal aptly noted: Khud Badalte Nahin, Quran Ko Badal Dete Hain; Huwe Kis Darja Faqeehan-e-Haram Be-Toufeeq

Since the last many centuries, Muslim societies, intellectually barren, have failed to evolve their own economic, political and social systems based on guidance available in the Quran and Sunnah. Following rigid, inflexible theocratic, clergy-evolved models, which emerged during monarchies, have been followed blindly without questioning their validity in modern times. Even the rationale behind these theories has never been tested on the touchstone of the principles enshrined in the Quran.

On the other hand, emulating western system in the peculiar Muslim milieu has been creating inconsistencies and incompatibilities due to fundamental differences in approach towards life as a whole. In this scenario, is it possible for the Muslim world as one community to evolve some common models for economic growth, resource-sharing and progressive taxation as a means to end income and wealth inequalities? The answer appears to be a big NO.  It is strange to see that Muslims living in various countries have common jurisprudence sources for evolving harmonized models in all spheres of life, but no serious thinking or effort has ever been made in this direction. In contrast, the European Union (EU), comprising countries with no common source of legislation, have successfully harmonized their tax system to a great extent during the last 15 years.

Why has the so-called Ummah (if there exists one) failed to evolve a union on the pattern of EU? The answer is simple: there exist unimaginable sectarian divisions, regional and ethnic animosities within the Muslim world. On the one hand, Muslims at large keep on telling the world that they profess faith in one God, one Book and one Prophet and on the other they do not even pause for a while in killing their own brothers and sisters in the name of self-assumed interpretations of various injunctions contained in the Quran itself. The modern day Western civilization has attained some degree of social and economic justice—though not completely but to a satisfactory level—by adopting principles of equality, social mobility, opportunities for all, respect for human dignity irrespective of class stratifications, work ethics, democratic culture and rule of law. All these elements are largely missing in majority of the Muslim States.

The issue of improvement of tax administration and introduction of Sharia taxation with particular reference to Zakat and Ushr “to meet the challenges/changes rapidly taking place in the world” cannot be seen in isolation. This goal cannot be achieved without first establishing democratic institutions and culture.

The tragedy with Muslim rulers and their bureaucracies is that they want to do everything without the involvement of the people. In a true democratic dispensation, such programmes of change are unthinkable without the active participation and support of the people for whom they are meant. Since the rulers of Muslim World have little respect for democratic culture and values, they try to impose Western models on their people without following their system to the core. They do not even know whether these models can be introduced in their societies as such, without appropriate modifications to conform to Quranic injunctions and Sunnah or even to suit local conditions and requirements. The obvious result is that they utterly fail to implement foreign models because of lack of people’s consent, motivation and participation and due to corrupt, incompetent and inefficient bureaucracies, which are not accountable to any public institutions. Tax systems and officials running them are no exceptions.

In this scenario, clergy-ridden, despotically-ruled and badly-governed Muslim societies have lost the very basic quality of adhering to the higher values of justice and rule of law. If they want to regain the strength and supremacy they once enjoyed in history, they will have to change themselves by getting rid of monarchs, despotic rulers and religious extremists and establish egalitarian societies (a just Islamic taxation system can play an important role in it). This point was repeatedly highlighted by Allama Iqbal.

The dilemma of today’s Muslims is that they want to regain past glory without realizing that the world today requires excellence in research and technology, which is not possible in undemocratic environments, for lack of freedom of thought and tolerance towards others people’s viewpoints. In their taxation systems, majority of the Muslim governments have little respect for redistribution of wealth and the sole aim is to collect more and more for unprecedented luxuries of the rulers.

In Pakistan, the rulers are burdening the poor with harsh and oppressive taxes that are utilised by the rulers for their comfort and for useless non-development activities.  The presumptive tax system is the worst example of this phenomenon. Adding insult to injury, tax officials feel no shame in holding conferences “to promote Sharia taxation”! Many of the tax administrators do not even know the basic precepts of Sharia what to talk of devising a tax system based on it. In the Federal Board of Revenue (FBR) not a single research study has ever been done by any officer on the issue of taxation of Islamic financial instruments. FBR’s self-styled, self-claimed tax experts are ordinary tax collectors who do not even possess dependable knowledge of tax codes they are supposed to administer let alone, tell other Muslim countries what is good for them!

Tax policy issues, after thorough public debate, should be translated into proper legislation in the Parliament taking into consideration advice of experts in the field. Everywhere in the world, universities are the main source from where the latest research—for framing laws and policies—on a particular subject emanates. In the Muslim World, our rulers want the tax collectors (who do not possess knowledge or expertise) to prepare tax codes and policies for us. In any civilized (democratic) society, this would certainly be considered an encroachment on the rights of people, but in the Muslim world this is an accepted norm and the sole prerogative of dictators/monarchs and their hand-picked cronies (bureaucrats). This is the root cause of Muslim decadence. 

In the entire Muslim World, including Pakistan, there is not a single institute where research on international taxation or Sharia-based taxation is conducted. This confirms that message of Allama Iqbal has been ignored in practice though verbally we keep on reiterating it. His message is simple: follow the Quran and Sunnah in all affairs. Of course, economics and taxation are no exceptions. The non-existence of Centre of Excellence on Taxation anywhere in the Muslim World is the real cause for concern. If they want to devise equitable tax systems based on injunctions contained in the Quran and Sunnah, the Muslim countries as highlighted by Allama Iqbal, instead of wasting time on useless conferences and debates within the circles of the clergy, should establish a common research centre in any leading university.


Ms. Huzaima Bukhari, Advocate High Court and Visiting Faculty at Lahore University of Management Sciences (LUMS), is author of numerous books and articles on Pakistani tax laws. She is editor of Taxation and partner of Huzaima & Ikram, a leading law firm of Pakistan. From 1984 to 2003, she was associated with Civil Services of Pakistan. Since 1989, she has been teaching tax laws at various institutions including government-run training institutes in Lahore. She specialises in the areas of international tax laws, corporate and commercial laws. She is review editor for many publications of Amsterdam-based International Bureau of Fiscal Documentation (IBFD) and contributes regularly to their journals. She has to her credit over 1500 articles on issues of public importance, printed in various journals, magazines and newspapers at home and abroad.


Dr. Ikramul Haq, Advocate Supreme Court, specialises in constitutional, corporate and tax laws. He established Huzaima & Ikram in 1996 and is presently its chief partner as well as partner in Huzaima Ikram & Ijaz. He studied journalism, English literature and law. He is Chief Editor of Taxation andVisiting Faculty at Lahore University of Management Sciences (LUMS). He has also coauthored with Huzaima Bukhari many books that include Pakistan: Enigma of Taxation, Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary andMaster Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis). He is author of Commentary on Avoidance of Double Taxation Agreements signed by Pakistan, Pakistan: From Hash to Heroin, its sequelPakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. He regularly writes columns for many Pakistani newspapers and international journals. He has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.

[1] “Allama Muhammad Iqbal, the thinker of Pakistan, was born on November 09, 1877. His poetry in Urdu (30 percent) and Persian (70 percent) inspired Muslim Ummah and played a vital role in the establishment of Pakistan. Of Course, the great and dedicated work done by Quaid-i-Azam Mohammad Ali Jinnah, the father of nation, enabled the dream of Allama Muhammad Iqbal to crystallise in reality. Iqbal started his career in 1899 as a teacher of history and philosophy, at the Lahore Oriental College. It was in 1903 that he wrote a book on economics in Urdu: ‘Jim al-Iqtisād. That was the time when the classics of Adam Smith, John Stuart Mill, Ricardo, Alfred Marshall and Taussig were taught all over Europe. But in the Indo-Pakistan subcontinent even teachers and scholars had only a hazy idea of this subject. In fact, except for three Universities, it was not yet introduced at the University level anywhere in the Indo-Pakistan subcontinent. But the talented poet not only studied this subject, he also familiarized it to the Urdu-knowing public”—Economic Philosophy of Iqbal,  Dr. Khawaja Amjad Saeed

[2] Her remarkable research, published by Iqbal Academy, can be seen in: علم ال اقتصاد: مقدمہ ، ترتیب و تحشیہ

[3] Economic Philosophy of Iqbal,  Dr. Khawaja Amjad Saeed

[4] Economic Vision of Allama Iqbal, Fateh M. Chaudhri, The Pakistan Development Review [Winter 2002. pp. 983–987]

[5] Allama Iqbal: A Critic of Capitalism & Globalization, Muhammad Ali Siddiqui, Journal of Management and Social Sciences [Vol. 4, No. 1, (Spring 2008) pp. 41- 45]

[6] Introducing  Iqbal the Economist, Pervez Tahir, The Pakistan Development Review [Winter 2001, pp. 1167–1176]

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