How should indirect taxes deal with Islamic finance?

Most of the discussion about Islamic finance taxation focuses on taxes on income and gains, known as “direct taxes”. However “indirect taxes” such as transfer taxes, sales taxes and value added tax can have a crippling impact upon Islamic finance transactions unless the tax system is specifically modified to cater for Islamic finance.

On 13 January 2014 I gave a lecture for the Institute of Islamic Banking and Insurance (IIBI). In the lecture I explained from first principles how sales taxes and value added taxes operate, and how they differ. I then explained why they cause special problems for Islamic finance transactions, and outlined some possible ways forward.

IIBI have now made the 33 minute video available and you can watch it below. Most of my slides appear on the screen, but for the convenience of readers I have made the full slidepack available.