Treasury hopes to make UK 'gateway to Islamic trade'
Chancellor paves way for Britain to become most important financial centre for Muslims outside the Islamic world
The Treasury has stepped up the process of adapting UK tax law to cover
Sharia-compliant financial instruments in a bid to make London the most
important financial centre for Muslims outside the Islamic world.
Clauses providing legal certainty for wakala products using agency
relationships that avoid the payment of interest (‘riba’ or ‘usury’ is forbidden
in the Koran) and musharaka arrangements involving diminishing share ownership
structures were passed with all-party support in the Finance Bill Committee in
the Commons.
And chancellor Gordon Brown told a conference organised by the Muslim
Council of Great Britain today, that the UK is well placed to play a role as a
‘gateway to Islamic trade’ with an expanding Islamic financial sector.
Adaptations to UK tax law to cope with Sharia-compliant instruments began in
2003 with a form of Islamic mortgage.
Treasury economic secretary Ed Balls told the committee a series of clauses
will help ‘provide a level paying field for basic financial products’.
He said: ‘The measures will be of benefit to everyone who wants to access
financial products that do not involve interest, but they will be of benefit in
particular to those members of the Muslim community who wish to avoid interest
for religious reasons.
‘The existing tax laws can be difficult to apply to such products and can
give awkward results.’
The clauses will provide consumers with certainty as to their tax position
and provide a regulatory power to allow further products to be incorporated into
the UK tax system.
In an unusual demonstration agreement with the government, shadow Tory chief
secretary Theresa Villiers said: ‘Ensuring that we are an attractive location
for Islamic finance could give us an important competitive edge.’ She said there
were ‘huge business opportunities’.
New Sharia-compliant instruments must be approved by a board of 15 Islamic
scholars that meets only twice a year in Mecca and Medina.
Earlier, paymaster general Dawn Primarolo made it clear the government meant
what it said in a statement she made on 2 December 2004 that arrangements
designed to avoid tax and national insurance contributions on income would be
backdated to that date.