Nick Shaxson ■ Tax haven Panama: it’s time for blacklists and sanctions now


PanamaTen years ago Jeffrey Robinson published a book about tax havens called The Sink, where he quotes a U.S. Customs official as saying of Panama:

“The country is filled with dishonest lawyers, dishonest bankers, dishonest company formation agents and dishonest companies registered there by those dishonest lawyers so that they can deposit dirty money into their dishonest banks. The Free Trade Zone is the black hole through which Panama has become one of the filthiest money laundering sinks in the world.”

That was then. We aren’t aware of any gigantic, earth-shaking clean-up in Panama since then. Such an event would have been accompanied by a lot of anguished howling from all those on the drugs-and-other-dirty-money gravy train.

But it’s just possible we were all on holiday when it happened, and we missed it. So how do things look today? Well, TJN’s Financial Secrecy Index gives it a secrecy score of 73, which is still pretty mucky, though not quite as bad as some. And the private players (those particular ones aren’t dishonest, obviously) are still calling Panama “a 100% Full-Fledged Tax Haven.“Suitcases of cash are still going across the border, we hear, long after most other tax havens closed down this particular offshore ruse. 

Panama has been playing hardball with international initiatives to crack down on financial secrecy, and unlike almost every tax haven in the world, as far as we know, it has not said a word about the OECD’s Common Reporting Standards. A private adviser tells TJN:

“Panama remains a big hole, the biggest hole, and a really serious problem. Most banks involved in recent money laundering scandals have subsidiaries there.”

And here’s a fuller laundry list of stuff, if you want more.

Now, via Fox News Latino:

“Colombia’s government on Wednesday declared Panama to be a tax haven after it failed to meet a deadline for signing a fiscal information exchange agreement.”

This means a tax on money transfers to Panama will be raised from 10 to 33 percent and Colombians will no longer be able to deduct purchases made in Panama on their income tax returns. Standard tax-haven blacklist stuff.

Panama, though, is outraged – outraged!  The foreign ministry says Panama has

“a competitive and sound tax system, and therefore the national government categorically rejects any tax-haven designation.”

And – get the cheek of this – they are threatening Colombia with retaliation!

So let’s get this straight, Panama. You refuse to sign a transparency agreement with Colombia, presumably one of the greatest sources of your dirty-money pile and whose drugs centre of Medellín lies just 200 km from your southeastern border. You say you won’t provide transparency because:

“the information-sharing agreement it has been asked to sign would be detrimental to the country’s position as an international corporate and financial center.”

And you still want us to believe your denials about you being a mucky tax haven? Even Switzerland has stopped being so blatantly obvious about the role that secrecy plays in its industry.

Theatre of probity, anyone?

The Economist observes, sardonically:

“In one of the most remembered scenes of the film Casablanca, police chief Louis Renault orders the close of Rick’s Cafe when he is “shocked, shocked” to learn that there was gambling going on in the establishment. Seconds later a waiter presents Renault with his winnings from roulette.

Panama was similarly shocked when Colombia last week included the neighbouring country on its list of tax havens, after the Central American nation failed to meet a deadline to sign a bilateral tax information exchange agreement.”

Well put.

It is time for the G20, the OECD and others to come out and use words such as ‘blacklist’ and ‘sanctions’ to deal with Panama. And then start to apply the pressure.

Slap this criminal financial jurisdiction with strong sanctions, until they are dragged, kicking and screaming into the civilised world and the modern age.



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Comments • 1

  • AvatarAnika
    April 5, 2016 - 6:41 am

    It is time for sanctions alright, maybe the US should also sign the same that Panama has refused to sigh. I guess the US is big and can say no, just as it refused Kyoto Protocol but the rest of the world must comply with whatever. then it is time to go for Delaware, Panama is peanuts compared to this

    When thinking of tax havens, one generally pictures notorious zero-tax Caribbean islands like the Cayman Islands and Bermuda. However, we can also find a tax haven a lot closer to home in the state of Delaware – a choice location for U.S. business formation. A loophole in Delaware’s tax code is responsible for the loss of billions of dollars in revenue in other U.S. states, and its lack of incorporation transparency makes it a magnet for people looking to create anonymous shell companies, which individuals and corporations can use to evade an inestimable amount in federal and foreign taxes. The Internal Revenue Service estimated a total tax gap of about $450 billion with $376 billion of it due to filers underreporting income in 2006 (the most recent tax year for which this data is available).[i] While it is impossible to know how much underreported income is hidden in Delaware shell companies, the First State’s ability to attract the formation of anonymous companies suggests that it could rival the amount of income hidden in more well-known offshore tax havens.

    OECD threat to Panama in 2015
    If Panama does not change its position on the automatic exchange of tax information, it will remain a home for “dirty money,” said Pascal Saint-Amans, of the Organization for Economic Cooperation and Development (OECD).
    The OECD’s director of the Center for Tax Policy and Administration warned Panama that if it does not fully implement the scheme, it will be “exposed to scrutiny that it is a home to dirty money.”
    Panama is one of several jurisdictions who have not signed the agreement, alongside countries such as Bahrain, Nauru and Vanuatu. The United States has also failed to sign the agreement, which is the primary reason given by Panama for not joining.

    The Global Forum on Transparency recently visited Panama to verify it has shared information with countries with which it has signed agreements, but those results will not be available until October. The OECD mandated that Panama sign bilateral agreements, which it did, but is now demanding that Panama sign the latest agreement, meaning it will be forced to share tax information with virtually any country in the world.

    Panama has refused to do so, joining a position shared with the U.S.

    Saint-Amans said that the OECD is not pressuring the U.S. because: “America is much more close to meeting the standards of the OECD than Panama.”

    What he failed to mention is that the U.S. has generally ignored agreements proposed by the OECD, which is based in Paris and whose policies are generally driven by European countries.

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