The Federal Board of Taxation has received submissions following last year’s release of a Discussion Paper entitled “Review of the Taxation Treatment of Islamic Finance”.
Various stakeholders made contributions including: Australian law firms; accountancy firms; academics; individuals; industry bodies (ie the Financial Services Council, CPA Australia and a joint submission from the Tax Institute of Australia and the AFMA); and the Department of NSW Treasury and Department of Industry & Investment NSW. For details of the Discussion Paper see our previous alert.
The submissions contained mixed responses to the proposals put forward in the Discussion Paper. Many were supportive of the Board’s proposal for regulatory reform to bring about parity between the tax treatment of Islamic finance products and non-Islamic finance products. Some suggested that a broad brush approach to regulatory reform should be applied, with the UK regulatory system cited as an example of a regime that does not use religion-specific wording in regulatory material and avoids excessive legal complexity with respect to the tax treatment of Islamic financial products.
The Board will now provide a final report to the Assistant Treasurer by the end of June 2011. Upon receipt of the final report, the Federal Government will consider the Board’s suggestions and may publish a response later this year.
It is also worth noting that prior to the recent NSW election, the former NSW Government announced that it intended to develop Sydney as a ‘centre of excellence in Islamic finance’. In accordance with this objective, the NSW Government’s Better Regulation Office is currently seeking stakeholder views on existing non-tax regulatory barriers to the provision of Islamic finance products in NSW. Upon receipt of submissions, the Office will advise the Premier, and the NSW Government may then proceed to publish its formal response later in the year.