Zakah on stocks: some unsettled issues

Abdul Azim Islahi and Mohammed Obaidullah

MPRA Paper from University Library of Munich, Germany

Abstract: Issues relating to zakah on equity shares are far from being settled if one considers the available fatawa and observed practices in many Muslim countries. The most basic questions pertain to the correct method of valuation of equity shares for the purpose of estimation of zakah liability. This paper reviews alternative methods of valuation and argues in favour of marketbased valuation. It also raises serious questions on the permissibility of exemption of fixed assets from zakah liability in the accounting based framework, notwithstanding its actual use in some Muslim countries. A market-based valuation framework is rooted in the notion of market efficiency, which dominates modern finance theories for over a century. The paper seeks to push forward the concept of "average price" as the basis of valuation as also of estimating zakah liability. It argues that the concept not only follows logically from the efficient market theory, but also is backed by sound Shari'ah evidence.

Keywords: Zakah tax; stock evaluatio; application of average price; Islamic economic (search for similar items in EconPapers)
JEL-codes: B52 D40 H2 M41 (search for similar items in EconPapers)
Date: 2002, Revised 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Journal of King Abdulaziz University -Islamic Economics 2.17(2004): pp. 3-17

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/18631/1/MPRA_paper_18631.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:18631

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().