Ushr, Part II of IINovember 16, 2009
In a stellar multi-essay series on the most significant taxes of Islam, Money Jihad has already broken down the jizya (i, ii, & iii), the zakat (i, ii, & iii), and concludes today with a second isntallment on the pernicious ushr tax.
Modern use of the ushr
While Muslim farmers around the world may pay their ushr locally and individually, ground zero for broad-based, national ushr taxation is in Pakistan and Afghanistan. Pakistan has a formal, countrywide ushr tax that applies to all Sunnis. Afghanistan has a de facto ushr system whereby the Taliban collects money directly from farmers in the provinces they control.
Sudan abandoned the ushr after a brief experiment in the 1980s. Sudan’s “Zakat tax system, which assesses businessmen according to their capital and discriminates against farmers, was widely criticized and almost impossible to collect,” reported the Los Angeles Times.
Although Saudi Arabia has an Islamized tax system, the Saudis rely on the zakat and corporate taxation as their primary sources of revenue. Perhaps even the Saudis realized that mandating the ushr would be counterproductive.
In Pakistan, farmers pay the ushr off of gross crop value minus the costs of production. The ushr law assumes that the cost of production is always 25 percent of the gross crop value. However, the real costs of production are somewhat difficult to quantify among farmers whose primary cost is their own time and labor.
Writing for the Economic Review, Mustafa Khalid found that, “Various studies undertaken at the University of Agriculture Faisalabad and Agricultural Prices Commission (APCOM) show that the cost of production of crops is about 24-52% higher than the gross crop value resulting in a net loss to the growers in Pakistan.” In other words, Pakistani farmers are already operating at a loss, and valuation is seen as extremely inaccurate.
Although government statistics from the early 1980s show reasonable ushr tax collection rates above 90 percent, by 1992 the collection rate had fallen to an abysmal 32 percent. Widespread disgust with the ushr is blamed for the refusal of many farmers to pay the tax. Some farmers see the ushr as double taxation alongside a second agricultural income tax that they have to pay. Others complain about corruption of their local zakat and ushr councils and therefore refuse to pay.
All of this confirms that ancient ushr system is ill-suited to the modern world, as we discussed yesterday.
Meanwhile in Afghanistan, the ushr isn’t working out so well for farmers there either, but it works out quite nicely for the Taliban. The United Nations has released these findings:
When in power (in the second half of the 1990s), the Taliban tolerated opium cultivation and facilitated its export. In the process, through a direct taxation on farmers (ushr) they generated about $75-100 million per year to fund a regime without alternative sources of foreign exchange…
In 2006-2007, the drug-related funds accruing to insurgents and warlords were estimated by UNODC at $200-400 million a year. This estimate included incomes from four sources: levies on opium farmers; protection fees on lab processing; transit fees on drug convoys; and taxation on imports of chemical precursors…
Between 2005 and 2008, the total estimated farm-gate value of opium produced in southern and western Afghanistan is US$ 2 billion. It is therefore tentatively estimated that approximately US$ 200 million (10 per cent of US$ 2 billion) was paid as ushr by farmers. Calculations based on UNODC field surveys suggest that Taliban insurgents receive 30-50 per cent of total Ushr levies. This range is also chosen to account for leakage resulting from the tax changing hands, as well as the fact that Taliban has not had total control in the provinces selected. At trader prices, this yields an estimate that Taliban insurgents collected around US$ 60–100 million in farm-gate taxation between 2005 and 2008.
The Afghanistan ushr on opium is a classic example of an ushr imposed by jihadists, collected by jihadists, and used to fund jihad. The Taliban is making more money than ever, and the driving force behind it is Islamic taxation.