International Tax Monitor Bulletin. P anama will not sign the Organization for Economic
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1 International Tax Monitor Bulletin Reproduced with permission from International Tax Monitor, 115 [itm-bul], 6/12/15. Copyright 2015 by The Bureau of National Affairs, Inc. ( ) Panama Panama Unlikely to Commit to Automatic Exchange of Infomation, Practitioner Says P anama will not sign the Organization for Economic Cooperation and Development s Multilateral Competent Authority Agreement (MCAA), nor will it commit to the automatic exchange of tax information (AEOI), unless it is beneficial for its citizens, a tax practitioner from the Central American country told Bloomberg BNA. Alvaro Aguilar-Alfu of Lombardi Aguilar Group in Panama, said the country has nothing to gain from joining the multilateral agreement because it only taxes local activities. He added that as tax competition is only one of the factors which attract foreign investment and businesses to the country, whether or not Panama decides to sign the multilateral agreement is unlikely by itself to discourage investment. The comments were made after seven new countries signed the MCAA earlier in June, sparking the question of when countries that have yet to make the commitment, such as Panama, may sign (110 ITM, 6/5/15). Following the recent signings, OECD s Head of International Cooperation and Tax Administration Achim Pross told Bloomberg BNA that although Panama had said it was not ready to implement the standard, his expectation was that it would eventually commit, citing the OECD s previous tax information exchange on request initiative, which took a number of years for all countries to get onboard. However, according to Aguilar-Alfu, if Panama were to commit to the AEOI before the September 2017 launch of the first information exchange, it would only do so if Panamanians would find it beneficial. Citing past canal treaties between Panama and the U.S., Aguilar-Alfu told Bloomberg BNA June 5 that Panama has a tradition of negotiating with superpowers, and its people actively participate in such discussions and express their approval through referendums. The unelected OECD technocrats who came up with a 2017 date did not ask the Panamanian people for that date and have not made Panama a member of the organization, Aguilar-Alfu said. He noted, however, that while Panama has not committed to sign the MCAA, it has ratified more than a dozen double taxation agreements under the OECD model and its foreign minister has committed to study joining the agreement under terms which benefit the Panamanian voter. However, in October 2014, the Panama Foreign Relations Ministry had said the AEOI poses many challenges for the Central American country (218 ITM, 11/4/14). Panama could be part of the initiative if the compliance costs are paid by those who stand to benefit from it, Aguilar-Alfu said. If the Panama taxpayer has to pay for the infrastructure required under a multilateral agreement, it is very unlikely that public funds needed now to build schools and roads to reach its 40 percent of voters living in poverty would be diverted to pay for the wishes of OECD technocrats, he said. [T]he Panamanian voter needs to be convinced that its implementation is not a useless expenditure, Aguilar-Alfu added. Instead of compliance with an international initiative defined outside of Panama, the Panamanian public opinion sees it as a new form of gunboat diplomacy and waits for a level playing field by onshore jurisdictions, he said, pointing out that the local authorities have received close to no information from onshore banking jurisdictions about funds held there from capital flight by former politicians. Along with Bahrain, the Cook Islands, Nauru and Vanuatu, Panama is one of the five remaining global jurisdictions that has a financial center, but has not committed to the AEOI. The governments of these countries did not respond to requests from Bloomberg BNA to explain why they have chosen not to join the initiative. COPYRIGHT 2015 BY THE BUREAU OF NATIONAL AFFAIRS, INC., WASHINGTON, D.C ISSN
2 2 OECD: Peer Pressure Will See Panama Sign Monica Bhatia, the OECD s head of the Global Forum on Transparency and Exchange of Information for Tax Purposes, told Bloomberg BNA that the Global Forum continues to make efforts in getting these jurisdictions to commit to the new standard for AEOI, adding that it is hopeful that at least some of them will commit to the initiative in time for the first exchanges. Peer pressure from the international community will be important in helping reach this goal as lack of a global application of automatic exchange of information may mean that money moves to less opaque jurisdictions, she told Bloomberg BNA June 5. The Global Forum currently has 125 members. To date, 94 members have committed to implementing the standard for the AEOI and 61 of these have signed the MCAA. Early adopters of the initiative will begin exchanging tax data from 2017 or Pross said that many more jurisdictions are expected to sign the MCAA over the coming months. Some independent signings are anticipated at the OECD s Paris headquarters, while a signing ceremony at the Global Forum s October meeting will see a large number of jurisdictions sign the convention. Of the 94 jurisdictions that have committed to the AEOI, the majority have or are expected to sign the MCAA by the end of this year, Pross said COPYRIGHT 2015 BY THE BUREAU OF NATIONAL AFFAIRS, INC., WASHINGTON, D.C. ITM ISSN
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