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Panama Ditches French Credit Line On Tax Haven Slur

by Mike Godfrey,, Washington

05 December 2011

The Panamanian government has announced its decision to withdraw from a multimillion funding arrangement with a French banking institution in retaliation for comments made by French Minister for the Budget and Public Accounts, Valerie Pecresse, in which Panama was labelled uncooperative in tax matters.

The agreement, concluded on November 1, for approximately USD300m in funding from French bank Compagnie Francaise D'Assurance Pour Le Commerce Extérieur (Coface) for part of a metro line, was pulled on November 27 by Panama's Minister of Economy and Finance, Frank De Lima, with the minister citing the political damage that had been caused by Pecresse's comments.

Pecresse, who has since issued a formal apology, had labelled the territory as non-cooperative despite its placement on the Organization for Economic Cooperation and Development's 'white list', which officially recognizes that Panama has 'substantially implemented the internationally-agreed standard on tax information exchange' having signed twelve or more Tax Information Exchange Agreements.

While Panama has adopted agreements with other nations for the exchange of tax information on request, when Panama's implementation of tax information sharing was assessed recently by the OECD, a number of shortcomings were observed which will require attention from the nation in order to be considered to have robust frameworks in place to share tax data.

The OECD's Phase One review of Panama highlighted 'significant problems' in the areas of:

  • Availability of ownership information, particularly in relation to joint stock corporations;
  • Availability of accounting information in respect of entities that are not in receipt of Panamanian source income;
  • Uncertainties regarding the Panamanian authorities' powers to obtain information for exchange purposes;
  • Availability of sanctions for failure to keep or produce information for exchange purposes; and
  • The territory's reluctance to enter into tax information exchange agreements rather than double tax agreements as a way to exchange information.

TAGS: tax | offshore confidentiality | tax information exchange agreement (TIEA) | fiscal policy | banking | international financial centres (IFC) | offshore | agreements | banking secrecy | G20 | Panama

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