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Tax Haven Questions Could Trip Up Panama
Trade Pact
Tax Haven
Questions Could Trip Up Panama Trade Pact
By Martin Vaughan, Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones) - Questions
about Panama's status as a tax haven have
raised a new hurdle for U.S. approval of a
free trade deal between the U.S. and the
Central American nation.
The U.S.-Panama trade pact was signed in
June 2007, but the deal has been stalled
along with separate bilateral trade pacts
with Colombia and South Korea.
The latter two trade deals are ensnared in
controversial human rights and market access
disputes. But the White House said earlier
this year in a "trade policy agenda"
document that it hoped to send the Panama
deal to Congress for consideration
"relatively quickly."
Democratic lawmakers and Obama
administration officials now say Panama must
take steps to increase transparency and
information exchange with U.S. authorities
on tax issues, before the free trade
agreement can advance.
"I would say with respect to Panama that
there are also some important issues that
need to be worked through having to do with
cooperation in resisting tax evasion," White
House National Economic Council Director
Larry Summers said at an April 18 press
conference at the Summit of the Americas.
The Treasury Dept. launched talks with
Panama towards a tax information exchange
agreement in 2002, but the talks have made
little progress.
U.S. business lobbyists who back the
U.S.-Panama trade deal have been pushing for
a vote prior to Congress' August recess. But
the demands from the Obama administration on
tax transparency seem to make that timetable
unlikely.
Panama holds presidential and parliamentary
elections May 3, and it is doubtful whether
the Treasury Dept. would be able to conclude
a tax information exchange agreement with
the lame-duck administration of outgoing
President Martin Torrijos.
The Organization for Economic Cooperation
and Development on April 2 listed Panama as
one of 30 tax haven jurisdictions that have
committed to international standards on bank
secrecy, but have "not yet substantially
implemented" those standards. Panama is also
mentioned in legislation introduced by Sen.
Carl Levin, D-Mich., with sanctions for tax
haven jurisdictions.
Panamanian officials did not immediately
respond to inquiries for this article. In a
March letter to the OECD, Panama said that
while it is not a tax haven, it is taking
steps to strengthen its "legal and
regulatory framework, thus helping our
international financial center to not by
unduly utilized by citizens of other States
to evade or defraud their respective tax
authorities."
But the letter from Minister of Commerce and
Industry Gisela A. de Porras said Panama
will insist on protecting fundamental
privacy, and will respond only to
"individual requests provided with a
specific rationale and justification."
Automatic exchange of information will thus
not be considered, the letter said.
It is only in recent days that U.S.
politicians have linked progress on tax and
bank secrecy issues to approval of the trade
deal, however. Opponents of the Panama pact
- led by fair-trade activist group Public
Citizen's Global Trade Watch - have long
sought to bring attention to Panama's
history as a tax haven.
Their efforts have been helped by a flurry
of media interest in global tax evasion, as
U.S. and European authorities have ramped up
pressure on such jurisdictions as
Switzerland, Liechtenstein, and Bermuda to
relax secrecy laws.
House Ways and Means Committee Democrats
have long been pressing Panama to make
changes in its labor laws, as a prerequisite
for allowing the free trade deal to advance.
Rep. Sander Levin, D-Mich., raised the tax
haven issues in connection with the free
trade deal during a March address to a
Washington trade group.
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