Analysis of Revenues Collected by Muslim Governments and Institutions, and How They Are Spent

The query appears to refer to revenues collected by governments in Muslim-majority countries (often grouped under the Organization of Islamic Cooperation, or OIC, with 57 member states) and related institutions, such as those handling Islamic financial obligations like Zakat. I’ll interpret “instructions” as a possible typo for “institutions,” focusing on both governmental and semi-governmental bodies involved in revenue collection. This analysis draws on traditional Islamic principles, modern practices, and aggregate data from OIC countries. Note that “Muslim governments” encompass a diverse range, from oil-rich monarchies like Saudi Arabia to populous democracies like Indonesia, so patterns vary widely. Data is based on recent economic outlooks (up to 2025 projections) and fiscal reports.

Traditional Islamic Framework for Revenues and Expenditures

In Islamic law (Sharia), public finance emphasizes equity, welfare, and avoidance of exploitation. Revenues are not just for state operations but for societal benefit, with prohibitions on interest (riba) and excessive taxation. Key types of Islamic taxes include:

• Zakat: An obligatory 2.5% levy on wealth (e.g., savings, livestock, crops) for Muslims, collected annually. It’s one of the Five Pillars of Islam and applies only to those above a minimum wealth threshold (nisab).
• Ushr: A 10% (or sometimes 5%) tax on agricultural produce from irrigated or naturally watered land.
• Kharaj: A land tax, originally on non-Muslims but later extended, based on productivity.
• Jizya: A per capita protection tax on non-Muslim residents (dhimmis), exempting the vulnerable (e.g., women, children, elderly).
• Khums: A 20% tax on war spoils, minerals, or certain windfalls, split between religious leaders and the needy.

Collection historically involved community or state oversight, with Zakat often self-assessed but verified by authorities. In modern contexts, these are supplemented by conventional taxes (e.g., income, VAT) due to insufficient yields from traditional sources alone. 29

Expenditures under Islamic principles prioritize eight categories for Zakat (Quran 9:60): the poor, needy, collectors, those to be reconciled to Islam, freeing captives, debtors, “in the cause of God” (e.g., defense, propagation), and travelers. Broader revenues fund public goods like infrastructure, administration, and welfare, ensuring a “level playing field” for citizens without waste or corruption. Historical Islamic states used these for military, education, and social support, but shortfalls led to additional levies criticized by scholars. 23 In theory, spending promotes economic justice and growth, with studies showing links between fiscal integrity, reduced inequality, and progress toward SDGs like poverty eradication in Muslim-majority countries. 22

Modern Collection and Distribution in Muslim-Majority Countries

Today, governments in Muslim-majority countries blend Sharia-compliant mechanisms with standard fiscal tools. Zakat is mandatory and state-collected in six countries (Libya, Malaysia, Pakistan, Saudi Arabia, Sudan, Yemen), focusing on assets like cash, crops, and metals; elsewhere (e.g., Indonesia, Turkey), it’s voluntary via mosques, committees, or private channels. Institutions like Zakat councils or ministries handle collection, with evasion common in mandatory systems, making them somewhat regressive. 40 For example:

• In Pakistan, the Central Zakat Council collects primarily from agriculture and distributes via local committees for welfare.
• In Saudi Arabia, the Zakat, Tax, and Customs Authority (ZATCA) integrates it with income taxes, applying to wealth and income.
• In Indonesia, bodies like Baznas (National Zakat Agency) manage voluntary contributions, channeling funds to education and health.

Non-Zakat revenues dominate modern budgets: oil/gas exports (in Gulf states), taxes (income, VAT, customs), fees, state enterprises, and aid. OIC countries average revenues at about 23% of GDP (e.g., 23.3% in 2023), lower than non-OIC developing countries (~32-33%) and developed nations (~35-40%), reflecting challenges in mobilization amid volatility from commodities. 42 Key sources include:

• Hydrocarbons: Dominant in Saudi Arabia (up to 70-80% of revenues), UAE, and Kuwait.
• Taxes and fees: Major in Turkey (income/VAT) and Indonesia (corporate taxes).
• Other: Mining in Indonesia/Pakistan, remittances in Pakistan/Bangladesh.

Institutions like Islamic banks and waqf (endowments) also generate revenues through Sharia-compliant finance (e.g., profit-sharing via Mudarabah), contributing to the $2.5 trillion global Islamic finance sector, which supports SDGs via innovative funding. 8

How Revenues Are Spent: Patterns and Examples

Expenditures in OIC countries average 25% of GDP (e.g., 25.2% in 2023), below non-OIC developing peers (~30-31%), with a focus on consumption, investment, and debt servicing. General government consumption is low (12-13% of GDP), prioritizing capital formation (28% of GDP in 2023, higher than developed countries). 42 Common allocations include military (high in conflict-prone areas), infrastructure, subsidies, education, and health, influenced by Islamic welfare ethos but often strained by deficits. OIC fiscal deficits averaged 1.9% of GDP in 2023, widening to 2.8% in 2024 and projected at 3.5% in 2025, driven by rising spending (e.g., on pensions, defense, climate) outpacing revenues. This is milder than non-OIC developing deficits (~5.4-5.9%) but signals vulnerabilities, especially in oil-dependent economies. 41 Studies link higher fiscal quality (e.g., transparency) to better outcomes like lower debt and higher tax revenues in OIC contexts. 7

Key Examples of Budget Breakdowns:

• Saudi Arabia (2025 Budget: ~$300B revenues, ~$320B expenditures): Revenues heavily from oil (~70%), taxes (~15%), and fees. Spending: Defense/military (~25%, high due to regional tensions), education (~20%), health/social (~15%), infrastructure/Vision 2030 projects (~20%), subsidies/debt (~20%). Deficit covered by reserves/borrowing; emphasizes diversification from oil. 32
• Indonesia (2025 Budget: ~$200B revenues, ~$220B expenditures): Revenues from taxes (60-70%, incl. VAT/corporate), oil/gas (~10%), non-tax (~20%). Spending: Infrastructure (~25%), education (~20%, mandated by constitution), health/social welfare (~15%), defense (~10%), subsidies (~15%), debt service (~15%). Focus on poverty reduction and growth; Zakat institutions distribute ~$10B annually to the needy.
• Turkey (2025 Budget: ~$400B revenues, ~$450B expenditures): Revenues from taxes (80%, incl. income/VAT), state enterprises (~10%), fees. Spending: Education (~15%), health (~10%), defense (~10%, elevated post-Syria ops), social security (~20%), infrastructure (~15%), debt (~20%). Recent inflation has boosted revenues but widened deficits; Islamic finance institutions fund public projects.
• Pakistan (2025 Budget: ~$50B revenues, ~$60B expenditures): Revenues from taxes (60%, often low collection), non-tax (20%, incl. remittances), grants/aid (~10%). Spending: Debt service (~30-40%, high burden), defense (~20%), subsidies (~15%), education/health (~10% combined), infrastructure (~10%). Zakat Council distributes ~$1B yearly to poor/widows; fiscal challenges include corruption and IMF bailouts. 28

In aggregate, OIC health spending is concentrated (41% by Turkey, Iran, Saudi in recent data), while military outlays hinder democracy in some cases. 19 Zakat funds often go to welfare (e.g., poverty aid in Malaysia), but overall, expenditures reflect pragmatic needs over strict Islamic ideals, with oil volatility and geopolitical risks driving deficits. For instance, Taliban Afghanistan modernized revenue (taxes/customs) for improved spending on services. 21

This analysis highlights diversity: Resource-rich states rely on exports for welfare-heavy spending, while others emphasize taxes for development. Challenges include low revenue bases and rising deficits, but Islamic institutions like Zakat provide a safety net, potentially aiding SDGs if scaled.

Islamic vs non Islamic countries taxation and spending priorities, efficiency

Comparison of Taxation and Revenues in Muslim-Majority (OIC) Countries vs. Non-Islamic Countries

This comparison builds on the earlier analysis of revenues and expenditures in Muslim-majority countries under the Organization of Islamic Cooperation (OIC, 57 members). Here, “non-Islamic countries” refers primarily to non-OIC nations, including developed economies (e.g., OECD members like the US, EU countries, Japan) and non-OIC developing countries (e.g., in Latin America, East Asia). Data draws from recent reports (2023-2025 projections), highlighting differences in tax types, collection methods, revenue levels, spending patterns, and fiscal outcomes. Note that systems vary within groups—e.g., oil-dependent Gulf states differ from populous OIC nations like Indonesia, just as progressive EU welfare states contrast with the US’s lower-tax model.

Types of Taxes and Revenue Sources

Taxation in OIC countries blends Sharia-compliant mechanisms with modern fiscal tools, emphasizing wealth redistribution and equity while prohibiting interest (riba). Traditional Islamic taxes include Zakat (2.5% on wealth above a threshold, obligatory for Muslims), Ushr (5-10% on agricultural produce), and Khums (20% on certain gains), often supplemented by Jizya historically (a per capita tax on non-Muslims, now rare). Modern additions include income taxes (typically flat or low-progressive rates, e.g., 0-20% in Saudi Arabia), VAT/GST (introduced recently in many, e.g., 5-15%), corporate taxes (10-30%), and resource rents (e.g., oil royalties dominating in Gulf states, up to 70-80% of revenues). Non-tax revenues like state-owned enterprise profits and aid are significant, especially in lower-income OIC members. 2 4 7

In contrast, non-Islamic countries rely on conventional, often progressive systems without religious mandates. Key taxes include personal income (progressive, e.g., 10-37% in the US, up to 45-55% in EU countries like France), corporate (15-35%, with global minimums via OECD pillars), consumption (VAT/GST at 10-27%, higher in Europe), property, and payroll/social security contributions (funding pensions/unemployment). Developed non-Islamic nations emphasize broad-based taxes for redistribution, while developing ones may lean on trade duties and indirect taxes due to weaker enforcement. Unlike Islamic systems, there’s no inherent wealth tax (though some like Spain or Norway have them), and interest-based financing is standard. Historical differences include Islamic avoidance of exploitative taxes, focusing on welfare, vs. Western evolution from feudal levies to modern progressive models for public goods. 20 41 43

Collection Methods and Institutions

In OIC countries, collection varies: Zakat is mandatory and state-managed in six nations (e.g., Saudi Arabia’s ZATCA integrates it with taxes), voluntary elsewhere via mosques or agencies like Indonesia’s Baznas. Modern taxes use centralized bodies (e.g., Pakistan’s Federal Board of Revenue), but evasion is common, making systems somewhat regressive. Institutions prioritize Sharia compliance, with waqf (endowments) and Islamic banks generating additional funds through profit-sharing. 8 15

Non-Islamic countries employ advanced, tech-driven agencies (e.g., US IRS, UK’s HMRC) with strong compliance via withholding, audits, and digital filing. Collection is more efficient in developed nations, often centralized at federal levels with local supplements. Developing non-OIC countries face similar evasion issues but lack religious frameworks, relying on IMF-guided reforms for broadening bases.

Revenue Levels as % of GDP

OIC countries average lower revenues: 23.1% of GDP in 2024 (projected to fall to 22.8% in 2025), below non-OIC developing countries (~25-30%) and far under developed ones (OECD average 33.9% in 2023, stable into 2024-2025). This reflects reliance on volatile commodities (e.g., oil in Middle East) and weaker tax bases; tax revenues alone average ~13% GDP in OIC vs. global ~13-15%, with Islamic finance adding marginally. 10 15 41 46

Non-Islamic developed countries collect more efficiently: US at 25.2% (2023, below OECD), EU/euro area ~46.4% (2024). Developing non-OIC (e.g., Brazil ~33%, India ~18-20%) vary but often exceed OIC averages due to broader indirect taxes. Higher revenues in the West support expansive welfare, while OIC gaps stem from informal economies and limited progressivity. 23 32 42

Expenditures: How Revenues Are Spent

OIC expenditures average 25.9% of GDP in 2024 (rising to 26.3% in 2025), focused on welfare (per Islamic principles, e.g., Zakat’s eight categories for the poor/debtors), defense (high in conflict areas, ~10-25%), education/health (~10-20%), infrastructure (~15-25%), and subsidies (~15%). Examples: Saudi Arabia ~32% GDP (defense 25%, Vision 2030 projects 20%); Indonesia ~22% (education 20%, poverty aid). Government consumption is low (13.2% GDP in 2023), prioritizing capital investment over recurrent spending. 10 28

Non-Islamic countries spend more: Developed averages ~40-50% GDP (US 39.7% in 2024; EU 49.5% in 2024, with Finland at 57.4%). Breakdowns emphasize social protection (pensions/unemployment ~20-30% in EU), healthcare (~10-15%), education (~10-15%), and defense (US ~15%, EU ~1-3%). EU focuses on universal welfare; US on targeted programs plus military. Developing non-OIC (e.g., China ~25-30%) prioritize infrastructure/growth. Non-Islamic spending often funds long-term liabilities like aging populations, contrasting OIC’s shorter-term welfare and resource-driven subsidies. 20 24 30 31 32 33 35

Fiscal Outcomes and Key Differences

OIC deficits average 2.8% GDP (2024, widening to 3.5% in 2025), milder than non-OIC developing (5.5-6.1%) but similar to some developed (e.g., euro area 3.1% in 2024). Challenges include commodity volatility and geopolitical risks, with lower debt sustainability vs. developed nations. 10 38 Non-Islamic developed countries have higher deficits (4.7% in 2024) but better management via borrowing; developing ones face wider gaps from revenue shortfalls.

Overall, Islamic systems promote ethical, welfare-oriented taxation with lower burdens but face mobilization issues, leading to smaller budgets and deficits. Non-Islamic, especially Western, enable larger welfare states through progressive, efficient collection but grapple with high debt (e.g., US/EU >100% GDP projections). Trends: OIC diversifying from oil; non-Islamic focusing on green/sustainable taxes. Both groups aim for SDGs, but OIC leverages Islamic finance for equity, while non-Islamic emphasize redistribution via social insurance. 1 7 20 24