What is the alms-tax (zakat/zakah)?

This word translated to alms-tax is "Zakat"; the third pillar of Islam.

In the Arabic language, Zakat means growth, blessings, purification, and development. It requires Muslims to pay a proportion (typically 2.5%) of their qualifying wealth on an annual basis.

Zakat can be summarized as an institutionalized act of worship to fulfill the needs of the believers and strengthen devotion to God by facilitating removal of barriers to faith and progress mentioned in the Quran (9:60). It ultimately facilitates devotion to God Almighty at an individual and collective level. The benefits of Zakat go back to the payer and to society as a whole.

God Almighty says,
[Qur'an chapter 9 verse 60]:
"Alms-tax is only for the poor and the needy, for those employed to administer it, for those whose hearts are attracted ˹to the faith˺, for ˹freeing˺ slaves, for those in debt, for God Almighty’s cause, and for ˹needy˺ travellers. ˹This is˺ an obligation from God Almighty. And God Almighty is All-Knowing, All-Wise."

Zakat is the one pillar that scholars have long identified as having the most obvious dual function of being an act of obedience to God and a means by which to affect positively the lives of human beings.

The above verse highlights eight categories of people deemed eligible to receive Zakat. They have been identified as:
1 ) Al-Fuqarā’ (the poor)
2 ) Al-Masākīn (the needy)
3 ) Al-‘Amilīna ‘Alayhā (administrators of Zakat)
4 ) Al-Mu’allafah Qulūbuhum (bringing hearts together)
5 ) Fir-Riqāb (those in bondage)
6 ) Al-Gharimīn (those in debt)
7 ) Fī-Sabīlillāh (for God’s cause)
8 ) Ibn al-Sabīl (the stranded traveller)

These categories address the following objectives and highlight the problems that arise from ignoring spending in any of these areas:
1 ) Al-Fuqara—poverty alleviation: the alternative is ongoing desperation, dislocation from the community, weakening of one’s faith, and the possibility of denial of God altogether.
2 ) Al-Masakin—economic empowerment; the alternative is constant financial struggle and lack of communal resources since there would be fewer Zakat payers.
3 ) Al-‘Amilina Alayha—efficient collection and effective Zakat administration of the other seven categories; the alternative is diminished collection and haphazard distribution.
4 ) Al-Mu’allafah Qulūbuhum—bringing hearts together through diplomacy, public relations, and social cohesion; the alternative is low social and political capital, animosity, and lack of influence.
5 ) Fir Riqab—emancipation, providing basic equality of rights and opportunity; the alternative is inequality and unfulfilled human potential.
6 ) Al-Gharimīn—removing burdensome financial constraints that result from debt; the alternative is poor mental health for those in debt, tension between lenders and borrowers, discouragement of the practice of lending if there is no backup for lenders who face bad debts.
7 ) Fī Sabīlillāh—supporting God’s cause and providing internal and external protection, by supporting those in the community who give of their time to represent and advocate on behalf of Islam and Muslims; and by supporting scholarship, so that scholars can guide people in a relevant way, and respond to the ideological and intellectual challenges of the day; the alternative is weakness in the face of external challenges, moral decline within the community, and low religious literacy.
8 ) Ibn al-Sabīl—for emergency situations, dealing with temporary dislocation; the alternative is social tension within and across communities if there is an inability to deal with stranded migrants or emergency scenarios.

Five of which deal with individual needs (categories 1, 2, 5, 6, 8.), two of which deal with collective needs of Muslims and Islam (categories 4 and 7), and one with proper administrative capacity (category 3).

The categories of Zakat recipients represent the challenges that affect the very fabric of a community:
these categories address the root problems that hinder an individual’s or community’s subservience to God;
each category addresses a constraint in the lives of individuals and/or society that weakens their ability to practice Islam.
In His Knowledge and Wisdom, God tells Muslims to distribute Zakat to tackle the various challenges that can act as barriers to people being able to remember, thank, and serve Him in a sustainable way.
As with all God’s instructions, they are only for our benefit, in this life and the next.

and God Almighty knows best.