Dr. Monzer Kahf, a prominent Muslim economist and counselor states: “I argue that since interest obtained on a saving account or any other deposit accrued to you is not yours from the Shari`ah point of view, you cannot use it for disposing of your legal obligations toward the government or toward any other entity you may have obligation to. You cannot even use it to pay the interest that accrues on an interest-based loan you may have borrowed.
The Shari`ah position is that earned interest is not earned, but it is still owned by the payer. But since the payer is a bank whose business is to give loans on interest, we must not return it to the payer, as such an action increases the evil of interest and empowers the evil doers. Thus, you need to dispose of this interest money by giving it to Muslim charity, not as a sadaqah (voluntary charity) but for the purpose of keeping your own money clean.
Taxes are civil obligations that are essentially the result of living together in a society and needing governmental services. Taxes are thus a personal obligation that must be paid out from your own money, not from money you do not own.”