Panama’s Taxes To Rise Under New Fiscal Austerity Measures

by Leroy Baker, Tax-News.com, Washington

13 January 2005

Businesses and individuals in Panama will soon be paying higher taxes after the government ushers in a series of “drastic” reform plans designed to put the country’s fiscal house back in order.

While Panama’s economy, which grew at a healthy 5% in 2004, received an upbeat assessment by the IMF last year, the country has nevertheless incurred heavy levels of debt which it is now struggling to service.

"The government is putting its house in order. We are executing drastic austerity measures," President Martin Torrijos informed some 200 business leaders in a speech broadcast on national television.

A statement obtained by Reuters also indicated the severity of the situation, warning: "If we continue with this pace of indebtedness and the consequent interest payments, it will become very difficult, if not impossible for the country to pay its creditors."

The statement went on to outline a proposal for a new tax on the Colon Free Trade Zone - the largest free port in the Americas – at a level that will collect revenue equal to 1% of the zone’s annual revenue.

Additional proposals seek to close tax loopholes for wealthy individuals and reduce tax breaks from income earned outside the country.

Moreover, fees paid by corporations would rise to $350 from $250, and new taxes would also be applied to winnings from casino slot machines.

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