This type of tax is levied on the part of the asset that goes beyond the provision of basic needs and a normal standard of living. Taxes are levied only on those whose wealth exceeds an average standard of living and nothing is taken from those who have no surplus wealth. This is because the Messenger of Allah (saw) said: “The best Sadaqah is that given out of richness.” The richness here means what the person can afford after satisfying his basic needs.

It was narrated from Jabir that the Messenger of Allah (peace be upon him) said: “Start with yourself when giving Sadaqah. If there remains any excess, then to your family. If there remains any excess, then to your relatives. If there remains any excess, then do like this, give those in front of you and those to your right and those to your left.” (Muslim). The principle of taxation also rests on that basis The priority is the maintenance of financial capability that makes possible even the Sadaqah-giving.
Allah (SWT) says:

They ask thee how much they are to spend; Say: "What is beyond your needs." Thus doth Allah Make clear to you His Signs: In order that ye may consider- (Quran 2:219)

In other words, it is an expenditure that does not cause difficulties and is not intended to cover extra needs. There is no concept of income tax in Islam as we find in western capitalist countries. Taxes are levied only on non-operating surplus assets, not on income. The State is also not allowed to impose indirect taxes above that such as sales taxes on goods and services. Nor can it impose taxes in the form of court fees, fees on petitions forwarded to the State, sale or registration of land, buildings or measurements or other types of taxes other than those in the shariah. This is because imposing oppressive or illegal taxation is one of the prohibited injustices about which the Messenger of Allah (peace be upon him) said:

“He who imposes maks (custom duty) would not enter paradise.” (Ad-Darimi, Ahmed and Abu ‘Ubayd)

In western capitalist countries their taxation penalizes the poor and vulnerable in society. Clever accounting and offshore bank accounts ensure the rich in western societies can avoid paying the majority of taxes altogether. With regressive taxes like the sales taxes on goods and services these hurt the poor more than the rich since the tax rates are the same for both. Unfortunately, the Muslim governments today see adopting the western capitalist system as the only way to achieve economic progress. We therefore find the same oppressive taxation introduced into Muslim countries. This is not to mention the endemic corruption where tax revenues are diverted from the State Treasury into the personal bank accounts of the rulers and other government officials.

According to Islamic principles, taxes are levied only to raise the funds needed to cover Bait ul-Mal’s mandatory expenses. When imposing taxation, no consideration is given to the notion of preventing the increase of wealth, or preventing richness or increasing the revenues of the Bait ul-Mal. Consideration is only given to fulfilling the required expenditure on the obligatory needs and interests on the State.

If any taxes are taken over and above the obligatory expenditure then this is considered a mazlama (injustice). The Court of Unjust Acts (mahkamat ul-mazalim) has the power to investigate any excessive taxation. If, following a judicial investigation, the tax or tax rate is indeed a mazlama, the court may order the state to abolish or reduce the tax and return the illegally collected money to the citizens.

Islamic Tax?

The Islamic approach offers a completely different perspective on the economy and taxation than it would be natural for an average non-Muslim person, as the basic principles of Islam are different from that of capitalism. Fundamentally taxation in Islam, the State puts the emphasis of taxation on wealth rather than income. The Islamic taxation system does not tax income, but taxes wealth. This means that the average person will be left with more disposable income and will be liable for tax on whatever wealth is left at the end of the year. This will have a significant effect on the economy.
In Islam although simplified, the wealth tax falls at 2.5%.
The main revenues of the State are:

1. The different types of public property revenues
2. The properties of Zakat
3. Booties (Fai'),
4. Land Tax (Kharaj)
5. Head Tax (Jizya)