Journal of Tax Research

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Exploring the differences between impacts of Islamic taxes / ordinary taxes on investment requires recognition of their properties and their differences. The paper shows, through mentioning kinds of Islamic government financial resources and the characteristics of each one, that firstly, the low rate of Islamic taxes, their stability, and their payments being considered as an act of worship, all and all prevent the problem of inefficiency secondly, the impacts of Khoms on the investment differ from the impacts of Zakah thirdly, some taxes such as tax on consumption or salary are not taken into account within the discussion of Islamic taxes and fourthly, the impacts of governmental taxes within Islamic environment may theoretically be similar to those of ordinary taxes. The paper has eventually explored the impacts of Islamic taxes on the investment and has showed that they have supported investments in various ways.

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Nowadays, the necessity of governmental and religious tax payments and, at the same time, the relationship between them, are the issues faced by the tax system and religious institutions as well as people in Islamic societies. So, determining the appropriate proportion of these two kinds of taxes can eliminate the concerns of religious believers, tax authorities and legislators. The present study compares aggregate income tax and khoms from an Islamic jurisprudence perspective. Khoms includes all structures required (regardless the administrative considerations) for an aggregate income tax system. The main difference remains in the fact that in khoms the exemptions are limited while the deductibles are broad. If the establishment of a khoms system is to be prioritized over aggregate income tax, there will be a need for an integrated information system consisting of the data of individuals'/ housholds' income and expenditures. Such a system would have complexities which might repeat our previous unsuccessful experience with the aggregated income tax. However, this aim can be attainable by recent developments in the country's income information system.

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One of the outstanding aspects in Islamic taxes such as Khums and Zakat is the use of a voluntary system for motivation, calculation and payment. In contrast, conventional taxes mainly use a control-incentive framework for tax compliance. Using an analytical approach, the current paper evaluates the plausibility of the two tax systems by asking whether we could use control and incentive polices in the Islamic tax system, as it is used in the conventional tax system. I hypothesize that morality plays an important role in the Islamic tax system and use of control and incentives might produce problems such as intrinsic motivation crowding out effect and weakening the moral training capacity of Islamic taxes. According to the findings of the paper, the use of sever control policies and conventional incentive polices affect moral incentives for tax payments in two ways. The control policies erode self-esteem and incentive polices change the mentality of agents about exchange market for tax payment. It seems that the efforts of Islam to expand the system of self declaration, the consumption of taxes in place in which they have been collected, flexible tax rates, the necessity of good intention during paying taxes and emphasis on training aspects of the tax, shows that Islam has been aware of the negative effects of control and incentive polices on tax morale.