Question: Is it allowed to under cost your products so that you will pay less tax to the government when managing a business? What is the Islamic Law concerning business?
Answer: Assalamu Alaikum,
Scholars have mentioned that this is not allowed. In this regard, the following answer has been given by Mufti Ibraheem Desai in response to a similar question.
The question posed to him was: “I am an importer of goods and have always been honest in paying my government duties. I have noticed that importers request their suppliers to under-invoice the consignment in order to pay a lesser amount in government duty. By me importing goods the proper way, I will be more expensive and will not be competitive in the market. Is it permissible for me to under-invoice the consignment in order to be competitive in the market?”
Answer: Every person who resides in a country or acquires its citizenship and enters into an agreement with that government should follow the laws of that land, therefore, he is under obligation to follow the laws unless a law of the land that compels him to do an act which is prohibited in Shariah. On the basis of this principle, since smuggling is illegal, a Muslim is required to abide by this restriction. (Justice Mufti Taqi Usmani, Pakistan) (Al Mahmood pg. 72. Fatawas by Mufti Ibraheem Desai-Darul Ifta Madrasah In’aamiyyah Camperdown South Africa).
And Allah Knows Best.
Mufti Waseem Khan.
29/4/2014.