Does not the verse 9:5 entail that the government cannot introduce and impose any taxes other than the zakah? The verse reads: If they have repented by establishing the Prayer and paying the Zakah leave their way.
This verse defines the limits of law making by any act of parliament as well. Any parliament cannot change the basics of law and order and cannot change the basics of charity and at the same time, cannot change the “get out of the way” instruction and keep getting into the way of the people with different agenda.
This follows that parliament cannot form any welfare financial institution. For that it will need money and as parliament cannot change the basics of charity or raise money for any other agenda, so it will become practically impossible for parliament to do anything for the welfare of underprivileged.
Answer
If we study the verse in its proper context we learn that it deals with a very specific command regarding the direct addressees of the Messenger of God (sws). The Almighty raised the Prophet Muhammad (sws) as His Messenger and regarding the Messenger, according to the Qur’an, there is a specific law. According to this law the addressees of the Messengers of God are punished in this very world after the latter perform itmam-I hujjah. For detail of this issue please refer to: http://monthly-renaissance.com/issue/content.aspx?id=478
Keeping this in view we come to the verse again and see that it directs the Messenger and his followers to punish the polytheists among the rejecters and do not spare them. However, if they repent by entering Islam, offer the Prayer and pay the zakah then they should be left alone. Once can deduce that since the verse permits the authorities to impose only two of the religious duties upon the direct addressees of the Messenger and should not coerce them into doing anything more than this in the sphere of religious duties we can apply this to the present state and hold that it is not allowed to demand more than this from its citizens. For example it cannot force them into paying taxes more than the zakah. But we cannot say that it does not allow the state to legislate anything. For Islam has not legislated all the possible human affairs. It has given the golden principle of consolation which can in the modern times mean democratic principles. To run the collective affairs the Muslims need to legislate and run their political life. We do not find any compelling arguments in these verses stating the impossibility of the right to legislate for the believers.
