Zakat for businesses: the issues of profits, assets, tax calculation and corporate social responsibility (CSR)

The complex issue of zakat will involve certain facets underlying profits, assets, tax calculation, and corporate social responsibility (CSR). The first challenge is determining whether gross or net profit should be used for zakat calculations, since this will determine the space of such liabilities. Second is the question of timing, since a business would have to face the trial of either paying zakat yearly or quarterly. Additionally, reinvested profits raise questions about their zakatability. Another complication arises upon treatment of assets. Businesses have diverse types of assets that may include cash, inventories, other investments, and non current assets. Although disputes arise over the zakatability of certain assets particularly non-liquid assets, further confusion comes about regarding valuation and possible depreciation. More confusion arises as to whether these depreciation value costs take much out of the asset's usefulness for productive purposes. Tax calculation is another issue. In certain states, zakat is deductible to corporate income tax, and in others, it's a distinct obligation. Companies also face the issue of calculating zakat prior to or after tax. In addition, if the government imposes zakat laws that differ from the acceptable Islamic rulings, more inconsistencies arise. Zakat also led to broader questions on CSR strategies integration. Many companies include zakat as part of their CSR initiatives, which is acceptable. However, there is growing concern about ensuring that, at the very least, these funds are genuinely used to provide some form of assistance to the poor or needy. Lastly, companies were questioned whether they use zakat donation for self-gain in building up a good image of the clientele, which is the root of goodwill and among other conditions for authentic zakat implementation in Islamic ethics. These are wider problems connected with the supply of common guidelines on zakat computation, perhaps especially because of multinational corporations and poor awareness of most companies concerning their responsibilities. These concerns would generally be resolved by common frameworks, enhanced education, and integration of zakat in CSR strategies in consonance with Islamic beliefs and modern accounting practices.