Monday, April 08, 2013

Tax incentives can help Islamic finance, but may also attract rent-seekers

In a recent speech, the Assistant MD of the Monetary Authority of Singapore explained that tax incentives should not form the basis for Singapore’s appeal in Islamic finance.  The tax incentives in developed markets should focus on encouraging early adopters and should have fixed expiration dates to avoid companies focusing on continuing the incentives rather than growing their business.  Less developed domestic markets, in contrast, may benefit more from longer-lasting incentives, but these incentives will also have to be phased out eventually.  The easy part is putting the incentives in.  It is much more challenging to determine when to end them.  

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