Panama Told the ICIJ That It Doesn’t Deserve or Want to Be Called a Tax Haven
The term “tax haven” tends to have a negative connotation. As such, it is no surprise that Panama is fighting against its designation as one. Panama recently made headlines by telling the International Consortium of Investigative Journalists (ICIJ) that it should not be considered one.
This is part of the country’s efforts to overcome its past reputation.
Panama’s Reputation as a Tax Haven
Panama has been considered a tax haven for years. It is one of the first countries that comes to mind when critics think about money laundering or tax avoidance. One of the widely known massive document dumps is even called the Panama Papers.
As a refresher, the Panama Papers were released in 2016. Among other things, they outlined Mossack Fonseca’s exploitation of Panama’s loose regulations. Fonseca used those loose regulations to offer offshore services to the powerful and rich around the world.
The Pandora Papers May Have Triggered Panama’s Defense
Panama had already been fighting its reputation as a tax haven or at least had plans to do so. However, the release of the Pandora Papers made this even more challenging.
The issue came from the fact that the Pandora Papers highlighted over two million records from a Panamanian law firm. Aleman, Cordero, Galindo & Lee (Alcogal) is among the country’s most prestigious law firms. It also didn’t help that the papers exposed Overseas Management Co., an offshore service provider in Panama.
These firms created shell companies for three Panamanian presidents and other heads of state. Some of those officials who created shell companies with the firms later faced accusations of corruption.
The Panamanian Government Sent the ICIJ a Letter
According to the ICIJ, they received a letter from the Panamanian government. They received it after asking OMC and Alcogal to comment on their findings. The letter came via an American lawyer. It essentially stated that the ICIJ had already hurt Panama’s reputation and asked them not to worsen it.
Panama Has Made Changes
The letter also explained that Panama has made drastic changes to its regulations since the Panama Papers. The letter says, “it has doubled down on its efforts for a more transparent international tax system in full collaboration with the international community.”
The letter also pointed out that the Panama Papers primarily focused on just one law firm. It argued that because of that, the “significant, negative impact” they had on the country was uncalled for.
However, some argue that Panama does hold some of the blame. This is due to the country’s history of allowing tax avoidance and corporate secrecy.
Follow-up Letter
There was also a follow-up letter, which included a statement from Victor Delgado. He is the superintendent of the newly created (in 2020) government entity to oversee companies that provide offshore services.
Delgado said that Panama has made significant progress to improve transparency in its corporate system. It also has made significant progress in preventing tax evasion and money laundering. Delgado also highlighted its progress in terms of sharing information.
Where Else Panama Is Fighting the Tax Haven Label
Panama has is not just working to change how the ICIJ views it. The country is also working in improving its Financial Action Task Force standing. It is also working to be removed from the tax haven blacklist from the European Union.
Some Specific Actions Panama Has Taken
The ICIJ investigation confirms that Panama has taken several steps to shed its tax haven label.
For instance, following the Pandora Papers, outsourcing due diligence for offshore companies was no longer required. Then, in 2019, the country passed a law to start creating a beneficial owner registry. While the law has gone into effect, the registry isn’t created yet. Delgado expects it to be ready next year.
Conclusion
Panama has been considered a tax haven for decades. Following the Panama and Pandora Papers, it has increased its efforts to shed this label. Panama recently directly reached out to the ICIJ in an attempt to change its reputation.
Sources:
https://www.investopedia.com/ask/answers/093015/why-panama-considered-tax-haven.asp
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