Will Panama Do Now?
(baumanblog.sovereignsociety.com) In the days since the G-20 hypocrites flocked together in London earlier this month, condemning a large part of the offshore world to their version of tax haven Purgatory, more than a few people have asked me: "What will Panama do now?"
A logical question, considering the established fact that Panama has been and remains, at least for now, one of the leading and best tax havens in the world. And I hope you noticed that when a many countries on the phony G-20 blacklist scrambled to sign up and "do right," Panama di not get in line, literally or figuratively.
There are good and historic reasons for Panama's enviable tax haven standing: 1) a territorial tax system that levies only on earnings within the country; 2) constantly modernized asset protection laws, dating from the 1920s; 3) an array of useful statutory legal entities (trusts, corporations, private foundations); 4) a host of qualified offshore professionals and bankers; and 5) some of the strongest financial privacy laws anywhere -- plus having no tax information exchange treaties (TIEAs) with any other nation.
Hatred for Financial Freedoms
All of the above are major financial freedom factors the G-20 and their ravenous tax collectors ritually hate. Their muscle flexing response, based on the absurd claim that tax havens contributed to the current word recession, was an arbitrary "tax haven blacklist" smear trumped up by the notorious G-20 financed, the Organization for Economic and Community Development (OECD). The seeming OECD motto: "Tax havens are bad because we say so."
There is no doubt that the G-20, and especially the United States under anti-tax haven President Obama, potentially could apply great pressure on Panama (or any country) to surrender its financial privacy laws. In their relentless hunt for more taxes, they could threaten to cut off Panama, the largest banking center in Latin America, from access to the U.S. banking system. (Did you know that the U.S. Treasury has the power to do exactly that, thanks to George Bush's beloved PATRIOT Act?)
But as Panama's major trading partner and security guarantor by treaty of the Panama Canal, even the Obama radicals would not be so foolish as to have the U.S. attack Panama based on G-20 and OECD press releases.
Panama a Hold Out?
But a headline in The Times of London, without offering much hard proof, is of the opinion that: "Panama holds out against campaign to end era of banking secrecy." Times reporter Elizabeth Judge notes that: "Faced with the growing hostility of politicians, some tax havens quickly crumbled under the pressure."
"But," she adds, "while countries such as Switzerland have bowed to demands to end the era of 'no questions asked banking', Panama is digging in its heels and touting for business as one of the few places where money can still be safely stowed away."
Her proof? "Leading tax advisers report that lawyers from the republic...have been e-mailing them to highlight its credentials as one of the last remaining tax havens."
(Understand that Panama is not about to end its tax haven status by imposing taxes on foreigners; rather the OECD and G-20's major demand is that Panama, and all offshore financial centers, repeal financial privacy laws).
I turned for advice to Derek Sambrook (left), a valued, long time member of our Sovereign Society Council of Experts and a leading trust officer in Panama, the head of Trust Services SA.
Derek tells us that the government of Panama has sent a reportedly non-committal letter to the OECD acknowledging the G-20 position and that's about it. Says Mr. Sambrook: "Unlike the domino waltz in which many tax havens engaged after the G-20 threats, Panama is not about to rush to agree to anything the OECD wants. There may be changes, but they will occur over a protracted period and at a snail's pace." In any case, he added, "I don't see Panama signing a TIEA with the United States in the near future".
Suggested Course: No Serious Changes
leading Panama newspaper, La Estrella (The Star), seems to agree with Mr. Sambrook's view. In an editorial entitled "Panama must clean its image," it suggests a possible course to follow:
"Unfortunately, it would be predictable for Panamanian officials to attempt to sidestep the issue by imitating the recent announcements by the tax-haven nations of Andorra, Liechtenstein and Switzerland that they will address certain tax and banking transparency concerns.
"Why would Panama, a country whose comparative advantage is providing a haven for foreign firms to avoid taxes, consider such an announcement? Because the plans that the other three secrecy jurisdictions rolled out are far from adequate, full of loopholes, and do not represent a meaningful way forward for them - or for Panama.
"Thus, Panama could try to quell the growing controversy without making serious changes to its excessive banking secrecy and policies that waive taxes for foreign firms."
Panama: Smiles and Firmness
There is a certain irony in all this.
Unlike some other nervous “tax havens,” such as The Bahamas, Bermuda and the Cayman Islands, the Republic of Panama, jealous of its hard won sovereignty after a century of U.S. control, in the past pointedly has refused to go along with the OECD on the basis of fairness for all.
For several years it has refused to sign an OECD memorandum of understanding which would have committed the government to imposing taxes on offshore investments, banking and other financial activity by foreigners. It also would have forced Panama eventually to automatic exchange of tax information among all governments, contrary to Panama’s financial privacy laws.
Panama’s refusal was based on its reasonable demand that the proposed OECD rules apply to all nations, that a “level playing field” be guaranteed before it would commit to accept and apply them. It has stood by that position ever since.
Defiance or Compliance
Impartial observers know that there is not now any “level playing field” among nations when it comes to tax information exchange and other financial rules. Repeatedly ignored is the trillion dollar volumes of international investment that make the U.S. and the U.K. the world's leading tax havens -- for foreigner investors, but not for their own citizens and residents.
Historically, Panama, the crossroads of the world, has survived handily for centuries, having learned how to deal with far worse invasions by foreigners (including Americans) than the OECD can amount.
Don't look for any open defiance -- and don't look for any immediate compliance
To learn about the many current offshore opportunities offered by the Republic of Panama, my best-selling book, Where To Stash Your Cash: Tax Havens of the World, explains all. For greater detail, Panama Money Secrets, which I also wrote, is your best bet.
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Original Source: baumanblog.sovereignsociety.com
Date Retrieved: April 21, 2009
