Avoiding Paying Tax.
Question:
If one is self employed and deals mainly in cash (i.e. plumber, black cab driver, market trader, seller of Islamic items outside a Masjid etc), does one have to declare to the Government all one has made or can one declare what he wants and pay tax on that amount? For example within a year one earned £40,000 cash and declares £20,000 and pays self employment tax on that?
Answer:
In principle, if tax is charged by a government fulfilling the following conditions, then the tax will be considered to be just, thus incumbent upon the citizens of that country to abide by the law and pay tax:
1) The tax amount is restricted to the actual need in financing the costs of running the country,
2) The amount is bearable for the citizen/s,
3) The method of collecting tax is simple and not troublesome for the masses,
4) The tax is used to finance the actual expenses and costs of running the country (and not placed in the pockets of the people in charge).
If a Muslim government (whose expenses are not covered with the other avenues of finance) taxes people with adherence to the above mentioned conditions, then it would be permissible for them to charge tax. A citizen of a Muslim or a non-Muslim country would have to abide by this and pay the tax duly. It will not be permissible to avoid paying tax under any circumstance.
However, if a government fails to comply with the above mentioned conditions whilst taxing people, then this type of tax will be considered to be unjust and excessive. If a Muslim government was to charge tax from its citizens in such a way, then the responsible people will be sinful.
In such a situation, it would also be permissible to evade paying tax provided one avoids lying, whether verbally or in writing, and that this is done with keeping self-respect.
At times, some portion of the tax may be just and the other unjust and excessive, thus the part of the tax which is unjust or excessive may be evaded provided one avoids lying.
Therefore, in your case, if you think that the government fails to comply with the above mentioned conditions, then you may evade the tax provided you do not lie, whether verbally or in writing.
At the same time, you must remember that, you can not claim any benefits offered by the government due to deception and lying being involved, both of which are clearly impermissible. The reason being that, if you declare less than your actual income, then you can not state this when claiming for benefit, for that will be lying. In paying tax, you may not be asked with regards to your earnings, thus you may be able to get away with it without having to lie.
And Allah Knows Best
[Mufti] Muhammad ibn Adam
Darul Iftaa
Leicester , UK