Wa `alaykum As-Salamu wa Rahmatullahi wa Barakatuh.
In the Name of Allah, Most Gracious, Most Merciful.
All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.
Dear questioner, thank you very much for raising this good question that reflects a good understanding and truthful desire to have a clearer view of the teachings of Islam. May Allah crown this truthful desire with His satisfaction and reward.
Zakah stands as the third pillar of Islam after testifying that there is no god but Allah and Muhammad is His final Messenger, and offering Prayer. The Prophet (peace and blessings be upon him) is reported to have said, “Islam is built upon five pillars: testifying that there is no true god except Allah and that Muhammad is the Messenger of Allah, performing Prayer, paying the zakah, making the pilgrimage to the Sacred House (Hajj), and fasting the month of Ramadan.” (Reported by Al-Bukhari)
Among the considerable signs of showing gratitude to Allah are zakah and charity. When a Muslim pays his zakah or spends something in charity, his soul is purified from miserliness and he rises to the peaks of magnanimity and honor. This very act of spending money in charity and zakah is itself a great sign of showing gratitude to Almighty Allah. Of course, all Muslims are commanded to show gratitude to Allah night and day.
In his response to your question, Dr. Monzer Kahf, a prominent Muslim economist and counselor states:
Zakah is part of the Islamic system as much as it is an individual financial obligation. As part of the system, it should in principle be collected by the government, or a special agency of it, and distributed only for the specific categories of recipients as mentioned in the Qur'an: (The alms are only for the poor and the needy, and those who collect them, and those whose hearts are to be reconciled, and to free the captives and the debtors, and for the cause of Allah, and (for) the wayfarers; a duty imposed by Allah. Allah is knower, Wise.) (At-Tawbah 9: 60)
Its advantages in comparison with taxes are: 1) it is permanent, cannot be eliminated by a governmental or legislative action; 2) its fixed rate, exemption and zakatable items cannot be altered; 3) it has specific recipients and cannot be used for other government objectives; and 4) it is enhanced by religious zeal as a part of religion. If it is collected by the government it must be collected in its name and designated for its recipients as an autonomous duty and operation.
At the individual level, all Muslims are required to pay it as an expression of obedience to Allah. It is the sister of Prayers in the sense that the latter is a bodily expression of submission to the Creator and the former is a financial expression of the same. This is the implication of the verse that made zakah a religious obligation (At-Tawbah 9: 103) for personal growth and purification. There is no system in the world, and there had never been, other than Islam that made the right of the poor unequivocal, permanent and outside the reach of political manipulation to the extent that even if the government does not take charge of it, you still have to do it personally. This is a great virtue that needs to be appreciated.
Finally, the need for zakah money is overwhelming all over the Muslim world, so much so that if there had not been such personal obligation, the wise ones among us would have thought to create one as a minimum expression of the Islamic brotherhood and the oneness of the Ummah.
You can also read:
Does Income Tax Replace Zakah?
Can I Keep the Tax Refund after Paying Zakah?