It is the duty of Muslims, especially those living in Western countries to reflect the true image of Islam and commit themselves to the proper Islamic manners both in theory and practice. Indeed, concealing one’s income to evade paying taxes is a prohibited act for a Muslim. It is a kind of lying which is totally prohibited in Islam. The Prophet (peace and blessings be upon him) is reported to have said, “The hypocrite has three characteristics: he tells lies, breaks his promise and breaches the trust.” (Reported by Al-Bukhari and Muslim)
Dr. `Ali Muhyy Ed-Deen Al-QaraDaaghi, head of department of Islamic Jurisprudence, Qatar university, states the following: Lying is absolutely forbidden in Islam, and hence it is not allowed for a Muslim to conceal anything related to one’s income when it comes to paying taxes.
thus, if a Muslim lives in a foreign country, it is incumbent upon him/her to abide by the laws of that country so long as they do not contradict the Laws of Allah. If there is such a contradiction, no one should be obeyed at the expense of disobeying Allah.
We should bear in mind that income taxes bring about benefit to society, as they may be spent on different legitimate ways such as refugees, the needy, or infrastructure, etc. Moreover, the normal relationship between man and the state is governed by a certain code to which man should stick unless it includes a flagrant contradiction or violation of Allah’s Law.