Why I Don't Pay Zakat On Stocks (Mostly)

Summary

In this video, the speaker discusses whether zakat is owed on stocks, offering a unique perspective based on personal research. He explains that the prophet did not directly address the issue of stocks, as they did not exist during his time. The speaker identifies four conditions that make an asset liable for zakat, emphasizing that stocks, while meeting most conditions, are useful in their current form, unlike idle wealth. The conclusion is that zakat is not owed on stocks since they contribute to the economy by supporting businesses that produce value, which aligns with the intended purpose of zakat.

Takeaways

• 😀 The video discusses the obligation of paying zakat on stocks, emphasizing that the topic requires scholarly research (i.e., Ijtihaad) since the Prophet Muhammad (PBUH) did not directly address it.
• 😀 The Quran mentions zakat as a general principle, but the details, including nisab, types of wealth, and zakat conditions, are provided through the Sunnah (practical examples and teachings of the Prophet PBUH).
• 😀 Zakat applies to assets that meet four conditions: ownership and control, nisab (minimum amount), completion of one lunar year, and the asset's lack of usefulness or idleness.
• 😀 Stocks can meet the first three conditions (ownership, nisab, and passage of one lunar year), but the fourth condition, which relates to usefulness or idleness, is where the discussion centers for zakat on stocks.
• 😀 Some scholars argue that zakat only applies to growing assets or those with the potential to grow. However, the speaker critiques this view, suggesting that it misinterprets the historical application of zakat.
• 😀 The Prophet (PBUH) imposed zakat on assets like livestock, gold, silver, crops, and minerals, which were generally idle or not directly useful until put to use (e.g., harvested crops, mined minerals).
• 😀 The concept of 'growth' in the context of zakat is not well-defined, as assets like gold and silver, which do not grow by themselves, were still subject to zakat, challenging the notion of growth being a requirement.
• 😀 The speaker suggests that zakat should not be imposed on assets that are actively being employed to produce value for society, like stocks in profitable companies, which contribute to economic growth and societal benefit.
• 😀 Zakat is intended to prevent wealth from sitting idle, and stocks, by funding companies and rewarding employees, are deemed useful, meaning zakat should not be owed on them, as they do not fit the criteria of idle wealth.
• 😀 The speaker argues that imposing zakat on stocks would be counterproductive, as it would divert wealth from efficient, productive businesses to less efficient organizations, such as charities or government entities, ultimately harming society’s economic efficiency.

Q & A

What is the main topic discussed in the video?

The main topic discussed is whether zakat is owed on stocks. The speaker presents their own reasoning and opinion on the subject, explaining that zakat should not be applied to stocks based on Islamic principles.

What is the initial step to determine if zakat is owed on a topic?

The initial step is to determine if the topic is even subject to zakat, which means verifying whether Allah or the Prophet (peace be upon him) have already addressed the issue in the Quran or Hadith.

Why does the speaker emphasize that zakat is not owed on assets obtained for personal use?

The speaker emphasizes this because zakat is only due on assets that are idle or not being used. Assets obtained for personal use, such as tools or transportation, are not considered idle, hence not subject to zakat.

What are the four attributes that make an asset liable for zakat?

The four attributes are: 1) Ownership and control, 2) Nisab (minimum amount), 3) A full lunar year (hawl) passing since ownership or zakat due date, and 4) The asset being idle or not useful in its current form.

Why does the speaker disagree with the idea of 'growth' being a condition for zakat?

The speaker argues that 'growth' is not a well-defined condition because the assets the Prophet (peace be upon him) imposed zakat on were not necessarily 'growing assets'. Instead, they were assets not in active use, which the speaker defines as 'idle wealth'.

What does the speaker suggest as a better condition than 'growth' for zakat to be owed?

The speaker suggests that the condition should be 'idleness' or 'lack of usefulness'. Assets that are not providing any benefit to the owner or society are considered idle and liable for zakat.

How does the speaker describe the societal usefulness of stocks?

The speaker explains that stocks are useful because they provide funding for businesses, reward management and employees, and help expand operations. Stocks contribute to the growth of companies that are producing useful goods and services.

What is the position on paying zakat on stocks according to the speaker?

According to the speaker, zakat is not owed on stocks because stocks are not idle wealth. They are considered productive assets, and the money invested in them is being used to support useful businesses.

What happens if someone tries to cheat the zakat system by timing their investments in stocks?

The speaker warns that if someone tries to cheat the zakat system by manipulating the timing of their investments to avoid paying zakat, it is as if they didn't engage in the investment at all. They would still owe zakat on the money they were trying to hide.

Does the speaker believe that zakat on stocks is necessary for supporting the categories zakat is meant for?

No, the speaker believes that zakat on stocks is unnecessary because the productive nature of stocks contributes more efficiently to society. The speaker argues that imposing zakat on stocks would be detrimental to the most efficient societal enterprises.