The Board of Taxation will undertake a review of Australia’s tax laws to ensure that they do not inhibit the expansion of Islamic finance, banking and insurance products, according to a statement from Assistant Treasurer Senator Nick Sherry and the Minister for Financial Services, Corporate Law and Superannuation, Chris Bowen.
“Islamic finance is a rapidly growing part of the global financial system and Australia is in an excellent position to capitalise on that growth, but we have [to make sure] our tax system doesn’t unnecessarily prevent that from happening,” Sherry said.
An Australian Financial Centre Forum (AFCF) report, which was released in January, recommended that the Board of Taxation undertake the review to ensure Islamic finance products have parity with conventional products, according to the statement.
“Australia has made major inroads into integrating an economic substance approach into our tax laws, particularly with the latest Taxation of Financial Arrangements legislative reforms progressed by the Rudd Government, which are squarely based on assessing the economic substance of a transaction rather than its legal form,” Sherry said.
“The Board of Taxation review will take this work to the next level by examining the Australian tax laws to make sure the wholesale market for Islamic instruments is not being hampered. I would like to be clear: this is not about special treatment or concessions for Islamic finance or its providers, but about ensuring that our system doesn’t unfairly disadvantage or preclude such instruments and, in doing so, deprive Australia of capital, jobs and growth.”
The Islamic finance, banking and insurance market is worth almost $1 trillion and could reach as much as $5 trillion, according to Moody’s Investor Services.
The detailed terms of reference of the review, including the dates for reporting to Government, will be released in the near future, according to the statement.
