Level playing field urged for Islamic Finance

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By 2017-09-14

By M.Rishar.M.Saleem

Development of Islamic Finance has not worked out to desired expectations due to the ignorance of government authorities with regard to the fundamentals of Islamic Finance and the value it could add to the Sri Lankan economy. A level playing field must be created to develop Islamic Finance in Sri Lanka. A leading Financial and Tax Attorney opined to Ceylon FT recently.

He recalled efforts which were made in Sri Lanka to create a level playing field; submissions were made to the Presidential Taxation Commission, Inland Revenue Department and the Ministry of Finance. As a result, in 2011, a budget proposal was made with regard to Islamic Finance. Subsequently four tax statutes were amended to create a level playing field for Islamic Financial Instruments viz Conventional Financial Instruments. These amendments to the Inland Revenue Act, Nation Building Tax Act (NBT), Value Added Tax Act (VAT), and the BAT Act were amended to empower the Commissioner General of Inland Revenue to come up with a detailed guideline to create a level playing field. The Commissioner General had to follow it up, but unfortunately to date, these guidelines are still pending and no clearance has been given so far.

"This is where Sri Lanka stands today as far as Islamic Finance is concerned. Statutes have been amended but the Commissioner General has to come up with detailed guidelines. So far this has not happened, there is an unacceptable delay. Basically the system is working but the detailed guidelines are needed. The detail guideline would create clarity in the minds of everyone including foreign investors who are waiting to make investments in Islamic Financial Instruments", he asserted.

He noted further "In addition to this, I would say there are other statutes which should be amended to facilitate the growth of Islamic Finance in Sri Lanka. The Banking Act should be amended further to facilitate more Islamic Financial Instruments to be issued by banks. Exchange Control regulations could also be modified to facilitate foreign investments in Islamic Financial Instruments and repatriation of returns. Stock Exchange rules should also facilitate listing of Sukuks in the Stock Exchange. The creation of a secondary market for Sukuks is crucial for the development of the Sukuks industry."



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