Changes to attract Islamic investment for Ireland

 

Aidan Walsh, corporate tax partner with Ernst Young, pointed out that it fits in with the firm’s recent global survey showing that the Republic is the world’s third most open economy.

PROPOSED TAX changes designed to attract business from the Islamic world are likely to be a first step according to Department of Finance officials.

The Finance Bill proposes to introduce new measures designed to accommodate transactions that comply with Sharia law, based on principles contained in the Koran, Islam’s sacred book.

According to the Department of Finance, the move is designed to clarify the law in this area in order to boost the Republic’s attractiveness to Islamic financial services.

The measures contained in this year’s Bill will be aimed at wholesale financial markets rather than retail business, but a department spokesman indicated that the Government is also willing to look at this.

The spokesman explained that the provisions are a first step, but pointed out that, in light of the Republic’s growing Muslim population, provisions dealing with retail financial services could be looked at next year.

Islamic financial services is a growth industry, and estimates of the worth of Islamic equity funds alone run to about €3.5 billion worldwide.

Sharia law governs these transactions. It forbids investing in stocks based on alcohol, tobacco, gambling, arms and other activities that are contrary to Muslim beliefs. In particular, the system bans the charging and paying of interest, and because of this prohibition, it is unclear how to treat it under the Irish tax laws that cover financial services, as these are based on interest payments and earnings.

It does allow certain types of credit sales which allow lenders, such as banks and financial institutions, to earn a profit on the amount that they have loaned, or arrangements where lenders share in the assets involved, and assume some of the risk and some of the profit.

Similarly, both the borrower and the lender can acquire the asset with an agreement that the borrower buys out the lender in the future at a profit.

Sharia law also permits the creation of tradable bonds known as “sukuks”, whose holders share in the underlying asset, and are entitled to a return from any profits, but not to interest payments.

The Finance Bill adds new provisions to the Taxes Consolidation Act 1997 that cover specified finance transactions, which will treat returns on Sharia law transactions as interest.

The measure covers a range of credit transactions and allows for the creation of investment securities similar to sukuks.

Commentators yesterday said that the provisions are basic, but welcome as they should help to open the Republic to new investment.

Aidan Walsh, corporate tax partner with Ernst Young, pointed out that it fits in with the firm’s recent global survey showing that the Republic is the world’s third most open economy.

“Ireland has benefited tremendously from globalisation with over 80 per cent of our goods and services exported internationally,” he said.

“Permitting and then encouraging different, non-Anglo-Saxon or non-western forms of financing and investing is a most welcome announcement from the department and will help further enhance our international attractiveness.”

source : irishtimes

MALAYSIAN ISLAMIC BANKS EYES MERGERS, ACQUISITIONS IN SOUTH EAST ASIA

Bank Islam Malaysia Berhad, Malaysia’s longest estbalished Islamic bank, is looking for merger and acquisition (M&A) opportunities in the South East Asian region, says managing director Zukri Samat.

“We are looking at any opportunity for mergers and acquisitions or taking a strategic stake in banks around the region,” he told reporters, after the official opening of Bank Islam’s 100th branch herehere Friday by Second Finance Ministeri Ahmad Husni Hanadzlah.

Zukri said Indonesia is one of the markets Bank Islam is eyeing, adding that with a population of 250 million, it offers enormous opportunities to grow Islamic banking.

He said the M&A initiative is a component of Bank Islam’s sustainable growth plan. The three-year plan is also aimed at increasing organic growth and strengthening the bank’s position on the domestic front.

“We are strengthening our position in the domestic market and at the same time looking for opportunities to grow beyond our shores,” he adde.

He said Bank Islam’s focus is on Islamic banks and there was no intention to acquire any conventional bank.

Asked if Bank Islam preferred a strategic or controlling stake, Zukri said: “Preferably, we would like a controlling stake. But, if there is a good proposition, we may consider a strategic stake.”

He also highlighted that Bank Islam was hoping to grow its customer deposits by expanding its network of branches. Bank Islam’s customer deposits stood at 25.2 billion ringgit (one USD = about 3.4 ringgit) as at June 30, 2009.

He stated that Bank Islam planned to move aggressively to add 15 new branches in strategic centres nationwide by the first half of next year and increase innovative offerings of products and services.

On the Dubai Group LLC, which owns a 30.5 per cent stake in Bank Islam and plans to sell its stake, for 1.0 billion Ringgit, he said this was a shareholder matter. Dubai Group had announced it was prepared to sell the stake in Bank Islam if there is a right offer.

Asked if any interested party was talking to Bank Islam regarding a possible purchase of the shares, Zukri said no one had sought to carry out due diligence on the matter.

source : NNN