REPORTING FROM PANAMA CITY, PANAMA:
The official answer to why the government of the Republic of Panama abandoned many decades of bank secrecy and signed a Tax Information Exchange Agreement (TIEA) with the United States was provided to me this afternoon in a personal interview with Hon. Frank DeLima, Panama’s Vice Minister of Economy.
I spent more than an hour in his office at the Ministry. In a candid talk Sr. DeLima said that President Ricardo Martinelli had made this decision in order to advance Panama’s economic world standing and to shed the blacklist status arbitrarily assigned the country by the U.S. and the OECD.
Off the Black List?
One of the major and repeated criticisms of Panama has been its (until now) iron clad law protecting financial privacy and bank secrecy, including a refusal to share tax information.
I also learned that Obama administration officials have suggested that signing the TIEA with Washington will go a long way towards achieving U.S. Senate approval of a 2007 U.S.-Panama Free Trade Agreement, a business deal very much wanted by Panama business interests.
Until now President Obama has given lip service support for the Panama FTA, but has done little to overcome opposition from U.S. unions and anti-offshore leftist politicians such as Michigan Sen. Carl Levin.
Panama in Control?
Mr. DeLima was joined in our meeting by Luis Alberto Laguerre, one of the official TIEA negotiators with Washington. Both insisted that the TIEA as signed, and the accompanying declaration, gives the upper hand to Panama in administering its terms.
However, a literal reading of both documents does not exactly support that claim.
I was told Panama rejected IRS demands to allow IRS agents to be placed in Panama and conduct investigations. That will be done only by Panamanian officials who will control each tax probe.
DeLima also said that independent of the TIEA, Panama has decided administratively to allow all persons subject to IRS request for tax information to be notified of that fact. He also suggested that the requirements for the IRS to submit specific names, particular bank accounts and bank identification would be strictly enforced.[adcode]
However, unlike procedure under a similar TIEA between the U.S. and Switzerland, Panama’s rules will not permit a judicial appeal by those subjected to an IRS information request.
“I can guarantee that no IRS ‘fishing expeditions’ with lists of names will be allowed,” DeLima insisted.
He added: “I do not think that anyone in Panama who is obliged to comply with US tax laws and who has done so has anything to worry about with this treaty and the way in which we will enforce it.”
The Minister said that while some changes in Panamanian law may be needed they will be limited to assuring beneficial ownership of all legal entities is known and available to the government, including a requirement that owners of bearer shares must be known.
I told Mr. DeLima that many astute Americans were well aware that the PATRIOT Act and other laws had abolished financial privacy in the U.S. – that they looked to Panama as a haven not for tax evasion, but for true financial privacy.
To that observation the Minister had no response.
Asked if the TIEA was in fact a “one-sided deal” that benefited only the U.S., the Minister admitted that the IRS has more to gain since Panama’s territorial tax system does not tax offshore earning.
Nevertheless, DeLima insisted that the increased world standing that Panama will supposedly now achieve, together with the possible approval of the US-Panama trade agreement, is worth abandoning bank secrecy.
“The only ones who should be disturbed are the law breakers,” he insisted. He predicted no real economic harm to Panama from the TIEA.
We should know soon enough whether President Martinelli’s TIEA gamble pays off.
In any case, this is an historic change of course for Panama — and a victory for the tax hungry major deficit spending governments led by the Obama administration.
How Will Obama React?
You are about to see a controversial new video.
It shows details of what will soon become the biggest political scandal of the Obama administration. Once it hits the mainstream media, millions of unprepared Americans will hit rock bottom.
How will Obama react? We’re not sure. Maybe you can tell us what you think once you see it for yourself.