April 28

Rule of Law and Shariah Law

The rule of law is one of the pillars of the Australian nation. It was brought to Australia in 1788 in the form of the common law. The penal colony was certainly not a gulag.

Since then the common law has been made completely Australian.  

I was therefore  intrigued to read in The Australian’s Cut and Paste of 28 April 2010 that there is to be  a comprehensive review by the Federal government relating to compliance with Shariah law.

This is to ensure that Australia's tax laws, wherever possible, do not inhibit the expansion of Islamic finance, banking and insurance products. Islamic finance is finance that is consistent with Shariah or Islamic law, as set out in the Qu'ran.

I looked up the media release of 26 April 2010 by the Assistant Treasurer, Senator Nick Sherry and the Minister for Financial Services, Corporate Law and Superannuation, Chris Bowen.

This explains   “Among other features, it must exclude the payment of interest, or riba, it prohibits excessive uncertainty and investments in certain sectors such as gambling and alcohol, it provides that there must be a genuine and tangible underlying asset to any investment and that profit and loss must be shared.”

The Assistant Treasurer was speaking in the United Arab Emirates. He said the Islamic finance market is worth almost $1 trillion and could reach as much as $5 trillion, according to Moody's Investor Services.  

Australia, he said, is in an excellent position capitalise on that growth, “but we have to identify if our tax system doesn't unnecessarily prevent that from happening."

He stressed the review “ 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 point of the review seems to be that Shariah-compliant financial products could be taxed unfairly, and this is to try to ensure this does not happen.  


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