As a Muslim who lived and studied in the UK for a while a few years back, I like to keep up to speed what’s going on there, particularly when it comes to the Muslim community.
The UK has a thriving and well-integrated Muslim population for the most part and London has long been known as one of the largest centres for Islamic finances. I was still quite surprised to read last month that Sharia law is going to become part of the UK’s tax budget!
How? Ah, that bit’s simple: The UK Treasury plans to simply rewrite Britain’s tax rules to incorporate elements of Sharia law that deal with lending, borrowing and taxation and therefore make money matters easier for Muslims.
The question is WHY?
Putting your Money where your Mullah is
The Sharia finance market is growing at the speed of light and looks set to top £205billion a year. Not surprisingly, the UK Government wants to tap into it and turn London into the “global gateway for Islamic finance”.
Here comes the tricky part: Sharia law dictates that conventional loans that involve repayments with interest are forbidden, so the UK is going to have to adapt if it wants a piece of the pie.
It doesn’t seem like such a far-out idea, given that The UK Government was one of the first Western countries to issue a state-backed sukuk (Islamic bond).
Sharia-compliant mortgages, car insurance and even baby bonds are available for UK Muslims who want to avoid “riba” (interest payments).
In December ‘09, the UK treasury proposed rewriting the present tax laws so that Muslim businessmen aren’t unfairly taxed if and when they try to raise money on their companies.
Jackpot or Hotpotch?
In an article in The Express, Mohammed Amin, head of Islamic finance at PricewaterhouseCoopers, said: “The UK has become the leading Western country in Islamic finance by taking a series of measures to ensure that Islamic finance is taxed no worse and no better than conventional finance.
Supporters of the proposed legislation say the Government is wisely knocking on the door of a market that could net London a fortune in the future.
Critics say that it’s rushing into a financial system it does not fully understand and question the extent to which British laws should be rewritten to accommodate Muslim practices.
The Financial Services Authority says its policy is one of “no obstacles, no special favours” for Islamic finance.