South African Islamic investors and financiers are likely to be recognised by way of a new insertion in the Income Tax Act, consultancy Grant Thornton says.
The proposed new section of the act would take into account Sharia’h practices which involved profit and risk sharing and forbade the paying or receiving of interest or investment in certain industries.
“The proposed new section of the act brings three types of Islamic financing transactions into the tax net — the investment account agreement called Mudarabah, the financing transaction known as Murabaha and joint ownership financing which is termed Diminishing Musharaka, all removing interest from the equation,” Tasneem Gangat, a tax consultant at Grant Thornton, said in a statement.
Interest was considered economically harmful by Sharia’h law as the extension of credit increased money supply, which stimulated demand for goods and services but did not always result in real,tangible economic activity. Continue reading