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Islamic Finance in Australia: Tax Implications and Policy Response

Explore the tax implications of Islamic finance in Australia, including structures, prohibitions, and responses by other countries. Critique the belated Australian reaction and discuss potential reforms.

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Islamic Finance in Australia: Tax Implications and Policy Response

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  1. Qld Tax Symposium 2011 Islamic Finance: Australia reacts belatedly. And impetuously? Associate Professor Justin Dabner Law School, James Cook University, Cairns, Australia

  2. Body text

  3. Islamic Finance: Australia reacts belatedly. And impetuously? • Introduction • The growth of Islamic Finance • The Shariah • The prohibitions • The structures • The tax implications • The opportunity • The Australian response

  4. The Shariah and finance structures • Murabaha (cost plus) • Mudharabah (profit sharing limited partnership) • Ijara wa-igtina (lease-purchase) • Musharakah (joint venture) and sukuk (securitization)

  5. Tax implications of Islamic finance • Stamp duty • GST/VAT • CGT • Income tax

  6. Responses by other countries • Malaysia • Positive discrimination • United Kingdom • No special favours

  7. Islamic finance in Australia • Australian tax implications of Islamic finance •  Inward Islamic foreign investment •  Developments in Australia • 2004 Victorian stamp duty amendments • 2009 Financial Centre Forum report • 2010 Australian Trade Commission report • 2010 Board of Taxation Discussion paper

  8. Critique of the Australian response: threshold questions • In substance interest or in lieu of interest? • Should Australia cater for Islamic finance? • The Islamic interest / The national interest • Are reforms benefitting one religious group permissible? • Should artificial / complex financial arrangements be endorsed?

  9. Critique of the Australian response: threshold questions (cont’d) • Are tax concessions a desirable policy tool? • Acceptability of tax integrity risks? • How significant is Islamic finance? • Is tax important to Islamic financiers? • `Level playing field`concession or global finance centre?

  10. What reforms might be adopted? • Stamp duty? • GST? • Income tax? • Finance sector incentives?

  11. Conclusion • Reform process failure?

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