Ironing out tax issues
20/08/2008
The Hong Kong government hopes to be able to iron out tax issues that could complicate the issuing by local insititutions of Islamic bonds, or sukuk, by October.
Because of the nature of these Islamic financial intruments, there is concern that sukuk will suffer from double taxation in Hong Kong under current rules, but the Treasury and Financial Services Bureau has indicated that a fix would be put in place in time for the issuing of the territory's first sukuk, by the government-owned Airport Authority, in October.
The double taxation of certain Islamic investments arises because the concept of interest is deemed unethical under principles of Shariah law, which governs Islamic finance.
As a consequence, intermediaries often have to buy financial products and sell them on to the borrower at a higher price to recognise a profit.
