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Fatwa CenterDeclaring bankruptcy to evade state-imposed taxes
Question
What is the ruling regarding bankruptcy to clear Government tax debt?
Answer
All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad 
is His Slave and Messenger.
If the government offers tax relief for bankruptcy as you have underlined, then there is no harm if the person who actually went bankrupt to declare himself bankrupt and file for bankruptcy relief so as to avail himself of this service.
However, if the person did not go bankrupt and declared himself bankrupt merely to avoid paying taxes, then this case entails further investigation regarding the permissibility of these taxes in the first place. Some state-imposed taxes are deemed allowed by the Islamic Sharee'ah; in this case, it is impermissible for a Muslim to wriggle out of paying such taxes or abstain from paying them. For more benefit, please refer to Fataawa 136065 and 88117.
On the other hand, some taxes are actually unjust from an Islamic perspective and constitute devouring people's property unlawfully. In this case, if the wronged person does not find any other way to ward off injustice except resorting to such a trick, there is no harm in that. We have underlined the lawful and unlawful categories of taxes in Fataawa 85356 and 203644.
Allaah Knows best.
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