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The khums tax menace: keep an eye on the recipients, not just the rate

December 22, 2009

The khums tax is based on the Koran 8:42: 

And ye know, that when ye have taken any booty, a fifth part belongeth to God and to the apostle, and to the near of kin, and to orphans, and to the poor, and to the wayfarer, if ye believe in God, and in that which we have sent down to our servant on the day of the victory, the day of the meeting of the Hosts.

Shia Muslims interpret this passage to apply to all financial gains—or ghanima—not just war booty the way Sunnis interpret it.

But what is wrong with the khums?  I can summarize the problem in three words:  Khums. Funds. Hezbollah.  But you don’t have to take my word for it.  Just read what members of Hezbollah have said about their khums revenue.

In 2005, Hezbollah spokesman Hussein Naboulsi proudly declared that most of their revenue comes from khums.  The interviewer asked him, “From where do you obtain your funds for all of your activities, be it military or social?”  His answer:

Mainly from donations. In our Shiia religious system we have “al Khums”, meaning that each year a 5th of our profit will go to the religious leaders who then proceed to further distribute the money. However, we accept money from anyone who believes in our cause. If the US or a European country would like to help us, their support would be welcome.

Cambridge scholar Syed Ali Abbas told Open Democracy in 2006 that Hezbollah and Iran are inextricably linked through the khums:

If Iran as a state were to withdraw material support for Hizbollah, this would not mean the collapse of Hizbollah as an organisation. Hizbollah gets most of its funding through the Shi’a taxation system of khums. This is a unique form of tax, quite separate from the mainstream Islamic tax (zakat).

In 2007, NPR’s John Ydstie asked Hezbollah expert Amal Saad-Ghorayeb, “And where is the money that Hezbollah has distributed come from?”

Ms. SAAD-GHORAYEB: Well, of course, Hezbollah doesn’t disclose its sources of financing, but what we do know is Hezbollah relies very much on Shiite religious taxes called the khums. And, at the same time, one can assume that Iran does provide Hezbollah with some financial aid, although neither Iran nor Hezbollah will admit to this.

The joys of khums don’t end there.  Khums has funded al-Houthi rebels in Yemen “for decades,” and khums allocations have caused friction in Iraq cities.

Meanwhile, Shia leaders (like the ones championing the khums that we covered in yesterday’s post) credit khums with promoting independence, flexibility, and evolving interpretations in Islamic scholarship by supplying plenty o’ money to the imams and ayatollahs:  under Shia taxation, the “leading ulama always enjoyed a degree of independence from the state that was unheard of elsewhere…due to a special ‘income tax’ (khums) that is paid to them directly by the faithful, making senior clerics…largely independent from state influence…”

For tax geeks like me, more details on the khums are available here and here.  But in this case the forest is more important than the trees:  khums is yet another coercive Islamic tax imposed at a high rate (20 percent isn’t the top marginal rate—it’s the effective rate), which has in practice led to the funding of the Hezbollah terrorists and strengthened the Iranian imamocracy.  And nobody in the Western media seem to care that Muslim charities want the khums to spread?

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39 comments

  1. khums is ordained by God. So whats wrong if it is using the money for the freedom. Israel is also getting all sorts of aid;money sophisticated war equipment technology to expand and maintain is userptions


    • You see nothing wrong when Hezbollah commits war crimes by targeting Israeli civilians?


  2. American delight see the atrocities committed by Hezbollah against the Israeli civilians but can not see scores of Muslim civilians being brutally killed and injured by Israel.Is this the American Delight?


    • If Hezbollah, Hamas, and the other enemies of the Jewish state would lay down there arms, Israel would no longer need to defend itself. Moreover, Israel does not target civilians like Hezbollah does.

      Recognize Israel’s right to exist, behave peacefully, and Israel will reciprocate.

      My moniker aside, I take no delight in the current state of affairs in the Middle East.


  3. [...] in 2007 to lecture their members in an ongoing effort to explain, expand, and export the 20 percent khums tax throughout the world.  The full four-part lecture series is available on their website, but as a [...]


  4. Khums is 20% and applies to all your assets from your money, house even your car. It also isn’t governed by Islamic taxation Zakat’s stringent conditions which is 2.5% only.


    • Thanks for visiting & commenting, Ahmed, but what you’ve written is inaccurate.

      The 20 percent applies to ghanima, which is “booty” or “gains” depending on how one translates it. Ghanima is something above and beyond what you already possess. Therefore, the 20 percent khums tax on ghanima is more similar to a capital gains tax or income tax.

      It is not a wealth tax like you describe as including all assets.


  5. The effective tax rate of khums is not 20%. Khums applies only to savings for the year, in other words it applies to net income and not gross. If one made $40,000 and spent $ 36,000 on expenses for yourself and your dependents, then khums would only apply to the remaining $4,000 for a total of $800 of khums due. The effective tax rate would therefore be 2%.

    As for the underlying issue of khums funding terrorism, it should be noted that khums is usually spent where it is collected making it highly unlikely that khums from the west is funding terrorist organizations. Classifying khums generally as terrorist funds is no more accurate then saying all money funds terrorism. As a practical matter it would be wise for shia muslims to ensure their khums is only being spent locally to avoid financing terrorism.


    • Jafar, not to belittle you, but do you understand the difference between a marginal rate and an effective rate? Twenty percent is the effective rate on gains as I indicated. Yes, gains mean income less expenses. And $800 is 20 percent of $4,000.

      It is not a graduated tax on gains where one would pay a smaller marginal rate on smaller gains. For example, a progressive tax on gains could be a 5 percent tax on gains less than of $5,000 or less, a 10 percent tax on gains between $5-10K, a 15 percent tax on $15K or more, etc. But khums is flat, not progressive.


  6. Linking a reference for you since your previous posts seem to indicate a belief that Khums is a tax on gross income as opposed to net.

    http://www.al-islam.org/beliefs/practices/khums.html#2.b

    “If his total income and his needs are equal, then there is no khums on him.”


    • Could you please show me where I’ve indicated something to the contrary?


  7. Thanks for the clarification. so unlike milton friedman and classical liberals you favor a “progressive” tax? So which system of taxation is more burdensome, one that taxes all of your income,or one that taxes only your gains? If you include tax deductions, then one most also address the market distortions the create.


    • I prefer a tax system that was approved by the consent of the governed as opposed to one established by religious fiat.


  8. I was not posting fire your benefit, but to illustrate how khums works in practice. You have written in a style that sounds like “omg 20% tax on gains.” The sensationalism is unfortunate because your post deals with an extraordinarily important issue regarding the use of charitable funds for terrorism.

    Perhaps you could make a chart of the IRC and ask your readers which system of taxation they would prefer. At least then they could compare apples to apples. If you wished to attack Islam and Muhammad that is your right, but it seems attacking Islamic taxes as onerous misses the mark.


  9. Fair enough, however, blind apologitics and rhetorical exaggerations dilute your points.


  10. [...] calls for taxes on Muslims apart from zakat such as khums and ushr which finance terrorist organizations throughout the Islamic [...]


  11. Hi there, just wanted to tell you, I enjoyed this blog post.
    It was funny. Keep on posting!


    • Gee, thanks, yeah, the financing of Hezbollah is hilarious. Thanks so much for sharing your insight and the important link to “louis vuitton bags.” I’m so grateful to have readers like you.


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  19. What is more problematic in the khums idea, is what the shiia call in arabic: المال الحلال المخلوط بالحرام
    Which means “the legitimate money mixed with illegitimate money”, and this is a section in the khums law. It means, that if a shiite stole a 1 million dollars from a bank, and gave 200,000$ to the clerics, he hasn’t commited sin, and he is working for the benefit of the shiite cause!


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