Analysis of the differences in the tax treatment of participatory and conventional financial products

Abstract

The influence of taxation on financing decisions has been argued in several studies. Islamic finance, which emerged in 1975 with institutions such as the Dubai Islamic Bank, is now practiced in more than 131 countries and presents new financing opportunities. However, in Morocco, participatory finance, an alternative to conventional finance, which is presumed to be based on Islamic principles, faces major challenges, particularly in terms of the tax framework. Its optimal development is therefore hampered by an imperfect regulatory framework and an unfavorable tax regime, which makes these products less attractive than conventional products, particularly because of their high cost. To analyze these failures, our article will be devoted to a comparison between the tax framework of conventional products and that of participatory products following a methodological approach based on a narrative literature review. From this comparative analysis, it emerges that, despite recent legislative efforts, the Moroccan tax framework for participatory products remains imperfect, resulting in a higher cost for the latter and hindering their optimal development compared to conventional finance.

Classification JEL : G20, G21, H2

Paper type : Theoretical Research