Panama Standing Firm on Tax Information Exchange and Banking Secrecy

In these changing political times, for those seeking secure locations for offshore protection of assets, Panama remains a top choice.

In a letter to the OECD after the London G-20 meeting at which Panama arbitrarily, (along with Switzerland and a number of other respected offshore financial centers), was placed on a “less than black” list (the Grey List), President Martin Torrijos’ Minister of Commerce and Industry, made clear that his government would only go so far in exchanging tax information.

She condemned the G-20 and the OECD for “…discriminatorily affecting the good name and competitiveness of the international [financial] services offered by the 澳門網頁設計 Republic of Panama and that are the backbone of our economy.”

The minister laid down these pre-conditions under which Panama would exchange tax information:

“1) The privacy of persons will continue to be protected and guaranteed against undue interference.

2) There shall be no automatic exchange of information.

3) There shall be no undue triangulation of information furnished among nations.

4) Any exchange of information shall be done based on individual requests supported by a specific and justified principle or law.

5) There shall be a reasonable transitional period with respect to any measure that must be implemented and that has an impact in the international services platform offered by the Republic of Panama, it being understood that the application of any measure shall occur at the same time as similar measures applied in each and every one of the states that are members or not of the OECD and that Panama considers to be competitors in the provision of international services.”

Note the emphasis in the last pre-condition above. Panama will only concede to any limited measure at the same time as similar measures have been applied to all other competitors in the provision of international services. That’s a long list and we doubt that every other competitor will come into conformity. China in the form of Hong Kong and Macau just for starters has signaled no such intentions.

Some commentators have inferred that the pending free trade agreement between Panama and the U.S., which has been pending congressional approval for some time, will be used to pressure Panama into caving in. What is lost in the small print is the fact that this agreement is far more beneficial to the U.S. side then the Panamanian.

Panama exported $377 million to the United States last year and 96% of the goods from Panama already enter the U.S. duty free under existing trade preferences. By contrast, Panama currently applies tariffs ranging from 8% to 15% on most manufactured goods, with rates in the high double and even triple digits for U.S. agricultural products.
Panama also bans the import of re-manufactured goods. That’s a potentially lucrative market for U.S. industrial and consumer exports, including cell phones, computers and earthmoving equipment.

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