Panama Investor Blog

Taxing the rich is causing exodus in Brittain

Hat tip to Tomas for this one.

Excerpts from UK Telegraph:

The British Virgin Islands, a popular tax haven in the Caribbean, has seen an 18 per cent rise on a year ago.

Those who are leaving what they see as the mainland’s punitive tax rates include highly paid bankers and hedge fund mangers along with entrepreneurs running luxury travel companies, healthcare, property firms and call centres.

“It’s not just the 50 per cent rate — it’s National Insurance, the treatment of pensions ... everything. It’s just a ridiculous amount of taxation.”

A new marketing brochure published by the island’s authorities promises “in Jersey, keep more of what you earn” based on corporation tax at 10 per cent and income tax at 20 per cent. There is no inheritance tax or capital gains tax and property taxes are also low.

Jersey Finance, an agency set up to attract financial talent to the island, has held a series of private dinners in London to persuade new residents to move to the island.

Geoff Cook, the agency’s chief executive, said: “The 50 per cent tax rate does seem to have been the tipping point for many people.”

The influx has also proved popular with estate agents on Jersey. James de la Cloche, director of Edge, a property consultancy, said: “We love Gordon [Brown] and Alistair [Darling] over here — we rather hope they get another term.”

Read the whole story here

Tax (in)Justice Network says Panama is "a grubby little tax haven"

Several U.S. advocacy groups are climbing on the band wagon to try force Panama to become more compliant in their tax information exchange.  The have names such as "Tax Justice Network" and "Public Citizen", names which would indicate they are advocates for freedom. What they really have in mind is enslavement of the populace by eliminating any option one might have to protect his/her wealth from the greedy politicians and tort lawyers who support them.  They are really working for the state under the guise of working in your best interest!

The Tax Justice Network is an organization that is closely aligned with the anti-tax haven ideals of the OECD except they see the OECD as hypocritical due the the fact that several member countries are the largest tax havens in the world with the U.S. and Great Britain leading the way. They want tax justice for the state, certainly not for the individual. They don't like tax competition and firmly believe that taxes should be universal and high. Here is how they see themselves: The Tax Justice Network (TJN) is an international, non-aligned coalition of researchers and activists with a shared concern about the harmful impacts of tax avoidance, tax competition and tax havens. www.taxjustice.net

Now they have focus on Panama because of the possible trade agreement with the U.S..

Here is an excerpt from their story; “While some offshore jurisdictions around the world have said they will no longer use bank secrecy to help tax cheats, Panama apparently still refuses to negotiate a tax information exchange agreement with the United States. We should not reward Panama with a free trade agreement unless and until it agrees to disclose information on U.S. tax dodgers,” said Sen. Levin."

Public Citizen has also come out with an attack on Panama with this supposed report titled "Panama FTA Would Undermine  U.S. Efforts to Stop Offshore Tax-Haven Abuse and Regulate Risky Financial Conduct " You can download this PDF report here.

 

Cleaning up Panama's financial reputation-The Economist

The Economist weighs in on the OECD issue in a "fair and balanced" way, pointing out the main issues and the argument Panama puts forth in order to maintain its sovereignty.

Key excerpt: Mr Martinelli cannot be seen as buckling to foreign pressure if he is to maintain his popularity. “Unlike Caribbean islands, Panama has a real economy, which makes negotiating treaties more complicated,” says Dulcidio de la Guardia, the vice-minister of finance. “Panama wants to be a responsible member of the international community. But it will always take care of its interests.”

Read the whole article on The economist website

Panama's response to IRS scare tactics

I posted an article earlier in the week where the U.S. government claims to be putting IRS investigative office in Panama. Today a short article in La Prensa carries Panama's response.

EDITH CASTILLO DUARTE Edith Castillo Duarte
ecastillo@prensa.com ecastillo@prensa.com

The Office of the U.S. Internal Revenue Service (IRS, by its initials in English) step up efforts to find the whereabouts of 7 thousand 500 citizens of that country are evading taxes through bank accounts have not revealed.

  To this end, the IRS has opened offices in Beijing, Sydney and Panama.

  The secretary general of the Banking, Amauri Castillo, said he had not yet been officially informed of the presence of these authorities, but feels his work is more related to the Department of Revenue.

He warned that with respect to the banking institution will defend the laws that establish confidentiality.

"The confidentiality must be respected and any investigation of tax matters must comply with tax law and Panamanian bank," he stressed.  Banking regulation safeguards the privacy and confidentiality of users of the system.

IRS to open criminal evasion office in Panama

My friend Bob Bauman of Sovereign Society just sent me this link. I wonder how it works with an IRS criminal office in Panama and what the point is of doing this unless it is just to scare potential evaders. Are they going to be putting IRS men in black at the airports or at the bank lobbies or are they going to be applying pressure to Panama banks to disclose information? Is this part of the OECD plan to force Panama to quit competing with the biggest tax haven (USA) in the world? Big brother is getting ever so obnoxious!

7,500 offshore tax evaders come clean

Wed Oct 14, 2009 2:52pm EDT
 
http://www.reuters.com/article/ousiv/idUSTRE59D4M320091014

WASHINGTON (Reuters) - Thousands of wealthy Americans have volunteered information about unreported income hidden in overseas accounts ahead of the deadline for a U.S. government tax amnesty program, the U.S. tax commissioner said on Wednesday.

Roughly 7,500 Americans have taken part in the amnesty program, more than double the participation reported a few weeks ago, Doug Shulman, commissioner of the Internal Revenue Service, told reporters during a briefing. The amnesty program ends on Thursday.

The IRS is expanding its offshore tax crackdown and will open new criminal offices in Beijing, Sydney and Panama, Shulman said. "The IRS has new momentum in this entire area and in the coming months our efforts will only intensify," he said.

Under the amnesty program that began in September, tax cheats can declare offshore income, pay reduced fines and get general immunity from criminal prosecution. The program turned up undeclared income from offshore accounts ranging from $10,000 to more than $100 million, Shulman said.

(Reporting by Kim Dixon; Editing by Diane Craft)

Panama Exposes Financial Services Policies

Source: estudio1panama.com

Machine translated
Monday, August 17, 2009

The government reported on Friday that the state policies for the promotion of international financial services offered by the country, the ambassadors of member countries of the Organization for Economic Cooperation and Development (OECD), international organization that brings together thirty most industrialized market economy.

  President and Chancellor of the Republic, Juan Carlos Varela and the Minister of Economy and Finance, Alberto Vallarino, explained the interest to establish the necessary agreements that Panama is excluded from any type of discrimination list that might imperil the financial system.

  "This shows clearly the message of the government of President Ricardo Martinelli, that item will be handled responsibly and seriously," Varela stressed.

One objective is to take a more active role on the image of Panama and its bilateral relations with various countries that have included blacklisted or have taken some sanctions against it, for its part said Vallarino.

  This is a policy that recognizes the importance of the OECD countries in their relations with Panama, "a very important value and we want to put in its true dimension of bilateral interests," added the Minister.

The objectives of this policy are to strengthen the continuing development of the international services and attracting foreign capital to promote the competitiveness and integrity of those services, and promoting and defending the good name of the country; agreements representing economic benefits for the nation and the exclusion list to Panama discriminatory tax reasons.

Panama adopted as public policy advocacy, negotiation, signing and implementation of treaties to avoid double taxation, effective mechanisms for exchange of tax information that provide additional economic benefits such as attracting foreign investment and measures to promote greater transparency in economic activities service.

Is this the end of Swiss bank secrecy?

The headlines are enough the scare people from using offshore bank accounts entirely. The IRS is winning the battle with the Swiss, forcing disclosure of 5000 of the over 50,000 U.S. account holders. Now the IRS will make high profile examples of those found to be TAX EVADERS and scare everyone else into submission. This news video link below explains a lot about the goings on. The commentators and attorneys interviewed seem almost giddy and speculate on how many others were caught up in the fishing expedition. The IRS "amnesty" program is being highlighted by attorneys as a good thing to do to avoid jail time. I wonder how many politicians names will turn up?

These first few being prosecuted were from a 250 name list a UBS employee sold to the IRS. How many poorly paid bank employees in Panama might do the same. Just throw in a U.S. passport and a new identity and it shouldn't be too hard to shake the monkeys from the trees.

View this video and then read the article below.

http://cosmos.bcst.yahoo.com/up/player/popup/?rn=289004&cl=15092946&src=finance&ch=4043681

UBS clients used foreign shells to hide income

UBS clients charged so far in US used foreign shells to hide income from IRS

MIAMI (AP) -- Wealthy American clients of Swiss bank UBS AG used sham corporations set up in havens from Hong Kong to the British Virgin Islands as part of their efforts to evade U.S. taxes, according to documents filed in Florida and California court cases.

The shell corporations, or "pass-through entities," were key elements of the tax-evasion schemes, but they also helped federal investigators snare the UBS clients.

It's cheap to set up the shell corporations in countries with little or no income tax and a lenient regulatory system, said Martin Press, a tax attorney with the Gunster law firm in Fort Lauderdale, Fla.

The most recent UBS client to plead guilty to tax charges, John McCarthy of Malibu, Calif., used a Hong Kong-based entity called COGS Enterprises Ltd. to open a UBS account in 2003. A statement of facts signed by McCarthy shows that he had more than $1 million transferred from his U.S.-based businesses to the secret UBS account opened in the COGS name.

"It is absolutely typical. They usually use one or more pass-through entities," Press said. "The common thread of all of them is that it is relatively inexpensive to create. If it wasn't, you might was well pay the taxes."

Read the rest here on yahoo finance....

Panama prepares to battle with the OECD

I was pleasantly surprised to read this article in La Prensa today where the special commission in charge of developing the strategy in dealing with the OECD have decided to take a stand. Seems Panama will hold firm to it's position and only do what is beneficial for Panama. Right now that is avoiding double taxation for companies doing business in Panama.  I'm sure the OECD will not be happy with this outcome. Article machine translated to English

From La Prensa;

Original article in Spanish here.

Panama has defined its national strategy which aims to remove the label of "tax haven" that has been hung by the Organization for Economic Cooperation and Development (OECD).

They will develope a strategy to include international actions to adopt as public policy to promote negotiations and the signing and implementation of treaties to avoid double taxation as a vehicle for attracting foreign capital.

The proposal, presented by the High Level Commission for the Defense of Financial Services International and the Cabinet Council approved on Tuesday night, provides analysis "on the basis of national priorities" was appropriate to apply the law of retaliation to countries that discriminate against Panama.

This is the case of Spain, Mexico, Argentina, Peru, Ecuador and Venezuela.

Efforts will also be launched at the World Trade Organization to make claims against nations that have the country on "blacklists" and analyze the feasibility of raising the discussion to a multilateral institution like the International Monetary Fund.

The Chamber of Commerce supports this initiative, which according to its chairman, Adolfo Linares, is a first step "properly and sustained" in order to deal with intelligence and arguments that would be the country's position before the unjust attacks of the OECD.

Linares advised, "very seriously" and selectively applying the law of retaliation.

U.S. - Panama trade deal come down to taxes and interest rates

The new Panama administration has made it clear that they want the trade agreement with the U.S., while the U.S. is not too keen on making the deal. After all, the 5.3 billion in trade between the two country's represents less than three hours of the total trade of the U.S.. Many groups in the U.S. oppose trade agreements claiming they move jobs out of the U.S.. So the U.S. is making a big deal out of the tax haven issue and holding it out as something that needs to be resolved before a deal can be done, even though there is a lot of indications that the U.S. will not enter into an agreement no matter what Panama does. It sounds like a carrot and stick game they are playing.

Panama seems willing to cooperate to some degree, but has not made it clear whether it will include a Tax Information Exchange Agreements or just an agreement regarding double taxation. The reason Panama is so interested in making the trade deal is to get better financial ratings rather than reducing tariffs on U.S. exports. After all, the canal expansion and other projects the government has proposed requires extensive borrowing.

I do not know what all that agreement entails, but divulging beneficial shareholders of corporations does not sound like it could be easily enforced without significant changes to Panama law. The fact that Panama allows barer shares is usually brought up as a sticking point. This would indicate that they already assume that corporate shareholders of Panama corporations will be disclosed, yet I have have not seen this discussed anywhere and I am at a loss on how it would be enforced.

My point is, the shareholder registry is not a public record and is usually in the possession of the legal representative of the corporation. In the case of a corporation having only one shareholder, that shareholder can hold the shareholder registration book if he wishes. This is the only record of who the shareholders of the corporation are. That shareholder could even be a foundation or another corporation in another jurisdiction. If the goal of the U.S. tax authorities is to ferret out corporate shareholders, then Panama would have to change the way this is handled.

I can assure you that if the hundreds of thousands of Panamanian corporations were forced to divulge shareholders, it would be the end of that industry, which brings in significant revenue to the state, as well as the legal firms who manage them. A great deal of power lays in the many law firms who derive huge incomes from this industry and I can't imagine them rolling over and letting it go down the drain. This is what gives me hope that an agreement will be reached that will not really make much of a change in the way corporations are handled in Panama.

The article is very well done and explains what's at stake on this important issue. I hope you will take the time to read it.

Excerpts from USAToday:" We understand that we have to move ahead on this, and we're gonna do it," Panama Vice President Juan Carlos Varela told USA TODAY in an interview. "We are committed to fight tax evasion and corruption everywhere."

The proposed trade deal would eliminate tariffs on U.S. exports to Panama, spurring new sales for American pork producers and heavy equipment makers such as Caterpillar. But the volume of two-way trade between the U.S. and Panama is a minuscule $5.2 billion, about equal to what the U.S. produces in three hours. And the modest economic gains carry a steep political price.

Foreigners have about $13.6 billion in deposits with Panama's 43 banks, plus an additional $11.7 billion in 30 so-called offshore banks, which are not allowed to accept deposits from Panamanians, according to the country's banking superintendent and the International Monetary Fund. A key attraction for depositors, especially wealthy individuals from politically volatile Latin American countries, is Panama's tradition of banking secrecy. The tax man back home, whether in Venezuela or the United States, never learns of interest earned here.

Investors also can establish corporations in Panama using a device called "bearer shares," which shield the owner from disclosure. "The secrecy laws there are very, very strict," says Shawn Carson, director of international tax at accounting firm CBIZ Mahoney Cohen.

Read the whole article here...

Panama's latest reaction to OECD pressure

As this is a very important issue for anyone banking in Panama or using Panama corporations, I am posting any relevant news regarding the issue. This article came out yesterday and today La Prensa reported it again with significant corrections.

Obviously there is no advantage to Panama signing a tax treaty with high tax jurisdictions. Foreigners using Panama banks and corporations are not concerned about the double taxation issue. That only applies to foreign companies doing business in Panama. There is a brief mention of some changes to Panama corporations, but no details. If they are talking about eliminating barer shares, that is not so concerning to me. If they are talking about a disclosure of corporate shareholders, then Panama will have some real problems. Why use a Panama Corporation? Delaware would be a lot cheaper.

From LA Prensa:

In the next two weeks, Panama must come up with a plan for its financial services industry to avoid sanctions being imposed by the Organization for Economic Cooperation and Development.

The two options being considered seem to be either signing a treaty to avoid double taxation or signing a treaty to exchange tax information. Either one would be in addition to changes in the regulations of "sociedades anónimas."

For now, it seems that there is a general consensus that the most appropriate measure would be to sign an agreement that would avoid double taxation. The agreement would not only include rules that would be used to avoid double taxation, but also mechanisms for collaboration between governments to detect cases of tax evasion.

Economy and Finance Minister Alberto Vallarino said that a country such as Panama would see no benefit from an agreement to exchange tax information, but would benefit from a treaty that avoids double taxation. 

Chamber of Commerce President Adolfo Linares is a proponent of the double taxation treaty because of the economic benefits it offers, as opposed to the exchanging of tax information. He recommended, however, that Panama should carefully define the parameters of the treaties and sign such agreements selectively.