Thursday 6 May 2010

Australian government pushes Shariah Compliant Finance, and hence enables the spread of Shariah

Below I have extracted the Islamic Finance section (aka "Shariah compliant Finance") of Australian Senator, and Assistant Treasurer, Nick Sherry's speech in Doha recently, with my comments in red.
There he is at left, in the dark, about Islam....
See also my Open Letter to Simon Crean about the subject.

27 APRIL 2010
It's a great pleasure to be here tonight.
Salam alay kum (Peace be upon you)….
[Salam alay kum is the greeting between Muslims, not for a non-Muslim to a Muslim audience]

Islamic finance
Australia is well aware of the potential for Islamic finance in developing our nation as a financial services centre.
The Financial Centre Report I just mentioned [the Johnson Report of 15 January 2010] includes two specific recommendations on Islamic finance.
First, the Report recommends the removal of regulatory barriers to the development of Islamic finance products in Australia.
[“Islamic finance products” are also known as Shariah-compliant Finance products (SCF).  SCF was conceived in the 60’s and 70s by people such as the radical Sheikh Maudidi,  as a means to increase the spread of Islam and Islamic law, the Shariah.  SCF has no “history” in Islam, but is rather a part of a supremacist push to ensure the spread of Sharia.  Hence, removing any barriers is removing barriers to the spread of Sharia Law]
Secondly, the Report calls for an inquiry by the Board of Taxation into whether Australian tax law needs to be amended to ensure that Islamic financial products have parity of treatment with conventional products.
[Apart from the role of SCF products in the spread of Shariah law more broadly, SCF products, especially the mortgage products used to avoid interest, are more costly than conventional products.  Hence, the amendment of Australian tax laws is helping not only the spread of Shariah, but also a more inefficient and more costly method of finance]
It is with great pleasure I can confirm today here in Qatar that as the first major installment in the Government's response to this landmark Report, I have directed the Board of Taxation to undertake a comprehensive review of Australia's tax laws to ensure that, wherever possible, they do not inhibit the expansion of Islamic finance, banking and insurance products.
[This para should read, if it were to be factually correct:  “I have great pleasure to confirm that we are taking steps to ensure that Australian tax laws do not inhibit the spread of an Islamist-inspired financial “system”, to spread Sharia Law and to introduce more inefficient and more costly products in Australia”]
Australia's decision means we will be among the first OECD countries to conduct this kind of system-wide review and it will mean we are among the very first to get all the tax settings right.
[Amend to: “we will be the first in the world to amend our tax settings to enable the spread of Shariah Law.”]
I know the United Kingdom has acted on a few discrete areas, but the review I am announcing is thoroughly comprehensive.
[The UK is starting to get a glimmer of understanding of the issues of dealing with an Islamic supremacist agenda, which may explain why it is reacting slowly to Islamist demands for change of law to “enable” SCF (if indeed they are moving slowly).  In other areas, however, Britain is in “front” of Australia, for example the provision of Shariah compliant Tribunals, which have been shown to hand down judgements discriminating against women and children]
Islamic finance is a rapidly growing part of the global financial system and Australia is in an excellent position capitalise on that growth, but we have to ensure our tax system doesn't unnecessarily prevent that from happening.
[One of the documented reasons there was a flight of funds from western banks to Islamic banks was to avoid the scrutiny of funds in the wake of  9/11 and US efforts to track terrorist financing.  “Enabling” SCF is to enable easier transfer of terrorist funding]
Today's announcement is major step in ensuring that we get the settings right.
[Who says the settings are “right”?  Only if you are in favour of the spread of Shariah.]
The Johnson Report stated:
"…another major source of offshore capital is the Middle East, reflecting the sharp rise in the world price of oil. [and the shift of funds out of western banks to Islamic banks to avoid scrutiny of funds to control funding of terrorist acts] The greatest opportunity for Australia in terms of accessing offshore capital pools at competitive rates would appear to be in the area of developing Shariah compliant wholesale investment products."
As many of you would know, the main tax issue faced in relation to accommodating Shariah-compliant financial products in most Western tax systems is the form-based nature of such instruments.
[That is “form over substance”.  There is no “interest” charged, but the nature of the transaction leads to income for the bank that is equivalent to interest.  The bank still makes a profit, but due to the extra documentation costs, and the roundabout nature of the transaction, the resulting product is more costly for the consumer]
That is, whereas Western tax codes normally focus on the details of the transaction in question and levy tax accordingly, this approach may give rise to anomalous tax treatments for Islamic instruments.
[“Anomalous”? So what?  The vast majority of Muslims have been quite happy to use conventional finance products, for the last 14 centuries.  It is only since they have been told, by those with an Islamist agenda, that they have an “obligation” to use so called Shariah compliant finance, that the business has grown and that it bumps up against our well-regulated financial system.  If one has to give, why should it be Australia’s well-regulated system?]
In a strict "form" approach, a transaction may, on its face, indicate one tax outcome, while the economic substance of the transaction may indicate another.
I am very pleased to say that Australia has made major inroads into integrating an economic substance approach into our tax laws, particularly with the latest of what is known as the Taxation of Financial Arrangements (TOFA) legislative reforms that I have into our Parliament.
The reforms are squarely based on assessing the economic substance of a transaction rather than its legal form.
The Board of Taxation review I am announcing today will take this work to the next level by examining the Australian tax laws to make sure the wholesale market for Islamic instruments is not being hampered.
I would like to be clear, this is not about special treatment or concessions for Islamic finance or its providers – and no-one interested in this market back in Australia has ever come to me seeking special tax beneficial arrangements.
[How is it not about “special treatment or concessions for Islamic finance or its providers”, when it is exactly that.  In fact, it is only that: special treatment for “form over substance” arrangements, driven by an Islamist agenda and more costly to the consumer.  To claim that it is not “special treatment” is disingenuous]
Our decision to review our entire tax code through the perspective of the treatment of Islamic financial instruments is about ensuring that our system doesn't unfairly disadvantage or preclude such instruments.
[Why should modern Islamist financial arrangements, driven by desire to spread Shariah law, and more costly finance for the consumer, not be “disadvantaged”?]
This will have a dual advantage – of course, if Australia's tax system continues down the path of accommodating this type of finance it will serve Australia in terms of capital attraction, jobs and growth.
[“… capital attraction, jobs and growth.”  Maybe, maybe; but at what cost?]
Fostering Islamic finance in our country will also open up new education and training opportunities for our universities and tertiary institutions.
For example, just last year, La Trobe University launched Australia's first Masters Degree in Islamic Banking and Finance. And many universities now offer subjects on Islamic banking and finance as part of a commerce/accounting/finance degree.
[More Shariah compliance in Australian tertiary institutions.]
Australia's major financial institutions are already moving into this area.
In February 2010, one of our top four banks, Westpac, was the first Australian bank to offer a short-term wholesale investment product structured specifically developed for Islamic financial institutions.
[This “wholesale investment product” is a “Sukuk Bond”.  Not only does it not invest in businesses in the alcohol, gambling and pork production sectors; also not allowed are investments in any business which helps non-Muslim religions, especially Jewish.  Support for Sukuk bonds amount to support for Islamically-mandated sanctions on Israel]
But in addition to all of this, it will serve the Islamic world both as another option to deliver a strong and diversified investment portfolio and as a critical stepping stone into the broader Asia-Pacific.
[Why is it that we should be helping the Islamic world to have a "stepping stone into the broader Asia-pacific"?  This statement on its own betrays a huge, gaping, ignorance of the clearly and often-stated aims of Islam to spread its religion to the world.  To western, liberal, humanist, secular, tolerant, democratic societies, this is anathema]
The detailed Terms of Reference of the important tax review, including the dates for reporting to Government, will be released in the near future and I look forward to further engaging with you all as we move forward on this issue.