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Panama must continue to improve tax transparency and how it exchanges information relevant in tax matters to sustain growth in its economy, the International Monetary Fund has said.
In the concluding statement for its Article IV visit, warned that the countries shift toward "increasing trade restrictions could lead to a slowdown in Canal activity, which could dampen Panama's growth and government revenue."
It said that Panama had taken completed several important policy actions towards over the past year, including committing to implement automatic exchange of tax information by 2018 and ratifying the OECD's Multilateral Convention on Tax Matters.
The country also adopted key pieces of domestic legislation that form the legal basis for automatic exchange of tax information, strengthening the revenue administration's powers, and reinforcing the accounting requirements for companies and foundations registered in Panama.
The IMF said that effective implementation of the Anti Money Laundering/ and Combatting the Finance of Terrorist (AML/CFT framework "is a critical complement to strengthening tax transparency."
"The AML/CFT framework has been strengthened, but it will be important to address remaining gaps, of which the most critical is to make tax crimes a predicate offense to money laundering," the statement said.
The IMF said that recent improvements in tax administration, the introduction of partial VAT withholding, and an upgraded tax filing system contributed to the strongest tax performance over the last three years.
It added that further measures should aim to strengthen the tax administration's institutional capacity, upgrade its IT system, and strengthen incentives for tax compliance.
These measures should be complemented by streamlining the complicated scheme of tax incentives and exemptions, the fund said.
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