NEW TREATY FOR PANAMA - A GOOD SIGN!
With all the leftist welfare states and their OECD clamoring for blacklists and boycotts aimed at one of the last nations with enough political courage to stand up for financial privacy and banking secrecy, we all knew this would have to happen sooner or later.
The Panamanian Prsident Ricardo Martinelli has signed a "tax information exchange" treaty with his Mexican colleague Felipe Calderón. But this treaty is NOT what you might think it to be when you hear the frightening words "tax information exchange".
Article 26
What these leftist radicals really want is automatic tax and financial information exchange, and they are still working desperately for that goal. But the reality is somewhat different. "Tax information exchange" is generally understood to mean negotiating and signing bilateral treaties between nations providing a specific method to be followed when one nation formally asks another nation for financial information about one of their citizens. Such requests are governed in each case by the specific terms of the bilateral treaty.
Bank secrecy takes a hit.. or does it?
Nations with strict banking secrecy, such as Switzerland, Luxembourg and Austria, have again and again publicly insisted that such treaty requests must name a specific person and a specific bank account belonging to them. As if that was not enough they would also have to provide at least prima face evidence of a possible violation of the requesting nation's tax laws. They insist that no "fishing expeditions" will be tolerated.
One of Panama's biggest newspapers "La Prensa" report that the two leaders described the new treaty as "an agreement to avoid double taxation and to prevent tax evasion on income tax." Mexican President Calderón said that with the signing of the agreement Mexico can promote Panama internationally as a country that meets OECD and international standards on tax and fiscal matters.
Details
We have not seen the specific terms of the treaty, but Panamanian sources say the agreement represents Martinelli's strategy to avoid Panama being classified as an uncooperative tax haven by negotiating and signing bilateral information sharing double taxation agreements with like-minded nations.
The sources continue to say that while the United States government wants to force Panama to "open it's books" in what the U.S. calls "information sharing," in fact the U.S. doesn't have any information Panama wants.
Territorial taxes
Panama has a "territorial tax system" which does not tax earnings outside its borders, so Panama does not need to know what its nationals or foreign nationals earn elsewhere. Hence all information would flow one way, from Panama to the United States, weakening the country's financial privacy laws.
Panama is one of several sovereign nations that share the view that the OECD and the United States have no right to pressure them to provide information on domestic corporations, trusts, family foundations and bank accounts, even if they are held by foreign nationals.
Traditional limited treaties
The treaty that Panama and Mexico signed, (and what Panama is negotiating with other countries), is a traditional bilateral agreement to avoid "double taxation" on an individual's offshore income. This does not include tax information exchange beyond what is required to avoid that double taxation.
At the same time Panama can and does point out that the country is being responsible internationally by signing such traditionaly limited treaties.