A comparative study between the tax on trade income and zakat on trade offers in Libya

A field study on both the Tax Authority and the Zakat Fund in the city of Misrata

Abstract

The current study aims to identify the similarities and differences between the tax on trade income and zakat on trade offers, applied to both the Tax Authority and the Zakat Fund in Misurata. The significance of the study is that it focuses on a subject that affects the economic development in Libya, as well as the lack of studies that deal with this topic, particularly in the local environment. A descriptive analytical approach was employed without ignoring the comparison aspect which considered one of the pillars of the study. Data were collected through published reports from Misurata Tax Authority and Misurata Zakat Fund. The findings reveal that the tax on trade does not recognize the value of zakat paid on trade offers, while zakat recognizes the tax as an expense or a provision that appears at the end of the year, and it is deducted from the Zakat receptacle when calculating zakat. This is as a result of the lack of coordination between the Tax Authority and the Zakat Fund, although both of them are public organizations affiliated to the Libyan government. The study recommends a development of the system of taxes on trade income to be in line with the Zakat system within the framework of a plan and a timetable for the transition from the tax system to a system combining tax and zakat.