Although it is not clear just why the Panama ambassador to the U.S. would resign so suddenly, it comes at a time of the signing of the tax exchange agreement and many speculate it is related. Many Panamanians in high level government positions as well as the private sector are concerned about the ramifications of the treaty both on foreigners and Panamanians, many of whom have dual citizenship.
Few dual citizens file tax returns in the U.S. even though the U.S. law states that failure to do so can be penalized with up to five years in prison. Some might say that this would not be put into force, but the fact is that failure to file was what landed Blade star Wesly Snipes in the pen.
Even though these Panamanians may pay taxes in Panama, they must also file tax returns and other documents with the IRS that go beyond just a statement of income such as bank account holdings and foreign corporation in which they are shareholders. Along with that much sought after privilege of holding dual citizenship comes the real possibility that they can be charged with tax evasion and other crimes for which until now they were shielded by Panama's privacy laws.
The fact is that the new law will criminalize many dual citizen Panamanians while at the same time putting a black mark on Panama in the eyes of anyone considering banking here. The country has broken its commitment to protect the privacy of depositors in Panamam banks. If they have thrown their own citizens into such a situation they certainly will not think twice about foreigners. That is already the case with U.S. citizens, but many other nationalities will think twice before banking here as they may be next on the tax information exchange list.
How can Panama solve this crisis while still signing the tax information exchange agreement? It would seem more prudent and fair to make the agreement effective only from the date it is signed or sometime in the future as all other tax exchange agreements have been. By going back three years it opens up Panama to all kinds of potential problems that could be avoided simply by eliminating the retroactive aspect of the agreement.
Dual citizen Panamanians can begin filing their tax returns along with disclosure of all their holdings and if foreigners want to continue to use Panama banks for their funds they may do so and those who want to leave quietly may do so without the concern of being prosecuted for failing to report a bank account in the past.
Some will say that they deserve what they get for not obeying the letter of the the law, but I contend that most are account holders for the protection of the money they have paid taxes on rather than trying to evade taxes. Under the current U.S financial situation and the litigious state of that Union, there is no question that keeping ones hard earned savings hidden is prudent and even necessary for future survival. To make criminal out of good people who are trying to protect what is rightfully theirs is un-justified IMO. With the new death tax being implimented, U.S. citizens and Dual Citizen Panamanians can look forward to paying 35% of their assets to the state when they die as well. In reality it waybe that the prized dual citizenship is more a liability than a benefit.
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