The Board of Taxation has submitted its final report into Australia's tax laws to ensure they do not inhibit the provision of Islamic finance, banking and insurance products, Parliamentary Secretary Bernie Ripoll has told the Amanie Australia Islamic Finance Forum in Melbourne.
The report was based on recommendations in the 2010 Johnson Report which offered policy options to better position Australia as a financial centre.
It was about ensuring a "fair and level playing field" according to Ripoll, and to ensure that Islamic financial products had parity of tax treatment with conventional products.
The introduction of Islamic finance products into the domestic market was a way to open Australia's financial services sector, and economy, to new opportunities for growth, said Ripoll.
Highly speculative activities, prohibited in Islamic finance, could protect the economy against abuses and distortions. He noted the excessive use of risk-hedging instruments and "toxic assets" during the global financial crisis.
The Government and Islamic finance shared similar motives in supporting a market system based on integrity, transparency and clarity, according to Ripoll.
Those principles maximised the efficient allocation of capital and resources, and would help to create jobs and sustainable growth, Ripoll said.
The Islamic finance market has an estimated annual growth rate of approximately 15-20 per cent with projections it will reach $US2 trillion within the next three to four years, Ripoll said.
Although Islamic finance was only in its early stages of development, Australian companies would seek out opportunities to tap alternative funding sources and invest in new areas, he said.
Institutional opportunities already existed with the establishment of Shariah-compliant funds, he said
The Johnson Report also recommended Government assess regulatory barriers to the development of Islamic financial products in Australia although no barriers had yet been identified, according to Ripoll.