A Marketplace Without Tax

The Messenger of Allah (peace be upon him) was also developing the economic system of the new Islamic state, so he designated an area next to the masjid to be the Madīnah marketplace, the central market of Madīnah. The Messenger of Allah (peace be upon him) devoted the space to be a market, and he said, "This is your marketplace, so let it not be diminished, and no tax should be levied on it" — so it was a tax-free market, because kharāj is money that is taken by the government on merchandise. So it was a tax-free market. The Messenger of Allah (peace be upon him) did not want to fix any prices once the prices were skyrocketing. So the Companions came to the Messenger of Allah (peace be upon him) and said, "We want you to fix the prices — the items are becoming very expensive." He said, in a report preserved in Sunan Abī Dāwūd: "Allah is the One who fixes prices, who withholds, gives abundantly and provides, and I hope that when I meet Allah, none of you will have a claim on me for an injustice regarding blood or property." This shows the freedom that Islam gave to the Islamic economic system, which does not place restrictions on the flow of money and how people would buy and sell in their trade.