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

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.

Admin costs of 50%? Islamic NGOs say OK

This one slipped by us until now.  Last month, a workshop was held among the leaders of major Muslim charities (ie, zakat, sadaqa, and khums tax collectors) in—of course—London.

A Shia Muslim advocacy group called “The World Federation of Khoja Shia Ithna-Asheri Muslim Communities” provided the only account of the workshop I could find .

One off-hand remark in the summary is particularly eye-opening.  Two small group discussions were held during the workshop.  “In one of the groups, a poll of the 6 large and small NGOs was held. The results showed that 5 of 6 charged administration costs between 7-15%, or project based costs which can sometimes be up to 50%.”

Overhead costs are something that all charities, including the best-run Western charities, face.  Seven to fifteen percent is not completely unreasonable…  Charity Navigator, a rater of American charities, finds that the median American fundraising charity spends “only 6% on administrative expenses.”

It’s hard to tell what the context of the discussion would be that allows “project based costs” that can consume 50 percent all donations in overhead expenses, but it seems awfully high.  Perhaps, as Money Jihad has speculated before, the zakat collectors feel justified in keeping a higher cut than most non-Islamic charities because the Koran specifically authorizes the zakat payments to be given to “those who collect them” (9:60).

What was also noteworthy, at least in the account provided by the World Federation, is the Shia machinations to spread khums taxation throughout the Islamic world.  We’ll publish a post going into greater detail about the khums within the next couple days, but basically it is a 20 percent tax traditionally imposed among Shia Muslims on gains or profits (ghanima)—or on net income in contemporary Shia societies.

The relatively high tax rate on ghanima, much of which goes directly into the pockets of imams, is a point of pride among Shias for supporting imams’ independence from state support.  But for the West, the khums should be a point of concern.