Tax expert calls parliament to enact law on Islamic banking

By Francis Lubega

27^th June 2023

Parliament has been advised to carefully deliberate the enactment of the requisite laws to govern the operations of Islamic Banking in Uganda, warning of the likely ramifications in case of any lapse.

Tax expert, Cephas Birungyi, a Team Leader at Birungyi, Barata, and Associates and a representative of the ULS underscored the need for a cautious approach in implementing the proposed legislation on Islamic Banking.

Currently, Parliament’s Committee on Finance, Planning, and Economic Development together with the Bank of Uganda are working to ensure that legislation enabling the introduction of Islamic banking products in Uganda is enacted.

While appearing before the Committee, Birungyi, highlighted the Uganda Revenue Authority – URA staffs have not yet been comprehensively trained in Sharia Law and Sharia law taxation which possess potential risks new tax bills are introduced.

Birungyi explained to the Committee that the portals of URA for Electronic tax are set in certain terms, which calls for change to software to conform to the prevailing provisions, adding that implementing the legislation without proper software development would be premature and legally challenging.

He called for a thorough examination and separate legislation to govern Islamic Banking citing that Sharia Law took some time to be developed, and therefore implementers need more time for proper training to be able to identify those going by the proposed and those who are not.

Further, Birungyi raised concerns about Section 75A of the principal Act, which allows the Commissioner General of the URA to re-characterize arrangements under Islamic financial business for the purpose of reflecting equivalent economic substance under conventional financial services.

In response, Amos Kakunda, the Committee Chairperson recognized the potential economic benefits of Islamic Banking but called for a balance between providing new financing options and thoroughly assessing the implications of such legislation.

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