Income Cycle and Economic Changes in Khalduni Thought: A Contemporary Islamic Perspective

Abstract

The taxation theory in Khaldunian thought is one of the earliest economic concepts that linked tax rates to the fate of the state and urbanization. Ibn Khaldun brilliantly realized that the relationship between taxation and production is inverse, and that increasing taxes does not necessarily lead to increased state revenues. Rather, it may lead to weakening economic activity, shrinking urbanization, and the ruin of the state.

What highlights the relevance of this theory is that many governments, especially unwise ones, do not accurately understand what is known today as the "optimal point" or "critical point" in the tax rate equation. They ignore the limits of balance between collection and impact, and fall into the error of unplanned tax increases, driven by the pressure of public expenditures, especially unnecessary and unproductive spending. Taxes increase without planning, leading to counterproductive results that only exacerbate the situation.

Contrary to the common perception that views taxes as merely a tool for collecting revenue, the primary objective of taxes, from the perspective of contemporary behavioral economics, is to regulate individuals' economic and consumer behavior. This is something that many fiscal policies in developing countries have neglected, as they focus on quantity without considering the overall behavioral impact of taxation.

Hence, the importance of this research emerges. It seeks to analyze Ibn Khaldun's view of taxation as a dynamic process embedded in the structure of the state and urbanization, while linking it to contemporary concepts such as tax justice, Islamic objectives, and behavioral economics. This is within a contemporary Islamic vision based on objective reasoning, not historical repetition or mechanical application