Panama has been very open and reformed since the revelations of the April 2016 "Panama Papers" – the investigation led by the International Consortium of Investigative Journalists (ICIJ) with more than 100 media outlets. The world -, but it's obviously not enough.
This small country located in the south of Central America, trying to get rid of its opaque tax haven for shell companies, is home to a major international financial center, with more than 640 banks and financial institutions, and 131 billion dollars (119 billion euros) of banking assets.
However, it has just received a footnote to an important transparency review conducted by the Global Forum for Transparency and Exchange of Information for Tax Purposes (the World Tax Forum) – this body of 158 member states backed by the OECD (Organization for Economic Co-operation and Development), dedicated to cooperation between states, to eliminate tax fraud and money laundering.
A bad "partially compliant"
Far from the expected "compliant" rating, which has been won by countries with the highest standards of cooperation adopted by the World Tax Forum, Panama is thus given a bad "partially compliant" – down a four-bar scale ( "Compliant," "Generally Compliant," "Partially Compliant," and "Not Compliant," according to a Forum report unveiled Tuesday, November 12.
The seven other jurisdictions audited by the World Tax Forum at the same time as Panama (Andorra, Curacao, Dominican Republic, Marshall Islands, Samoa, Saudi Arabia and the United Arab Emirates) have, for their part, obtained a "generally consistent".
What was the examination? Since 2016, the Global Tax Forum has embarked on an ambitious multi-year assessment of the laws and practices of its member countries on exchanging information about taxpayers (bank accounts, financial assets …), at the request of third countries (during tax or judicial investigations). A "peer review", returning, for countries, to cheer each other. The results are published along the water.
Clearly, it is a matter of seeing if the states hosting foreign money on their soil are able to transmit the right information when they are questioned, and if they transmit the information well – the exchange on demand , targeting a specific file, remains one of the two modes of exchange of information, with the automatic exchange, widely deployed since 2018. According to the latest standards adopted by the OECD countries, demanding standards that suppose reveal to the applicants the identity of the beneficial owner (real, final …) of accounts, companies, foundations or even contracts, often concealed behind men of straw recruited by companies of fictional domicile or law firms to the image of ex-Mossack Fonseca, at the center of the Panama Papers scandal.
A first evaluation work of the member countries had been conducted between 2010 and 2016, but on the basis of older standards. However, at the end of this new thorough examination, Panama is certainly not recalibrated, as it had been previously, and has, on the contrary, made "Considerable progress"says the World Tax Forum, to comply with OECD recommendations (well-established on-demand exchange mechanisms, strong network of partner countries to exchange information, strengthened tax administration, binding laws and regulations for finance, etc.).
But the country faces two big problems: information on the identity of the final beneficiaries of accounts or entities that is not always available, especially in foundations, with shortcomings that are little or no longer controlled or sanctioned; and most importantly, missing data or records. Serious obstacles, therefore, to unmask fraudsters and criminal networks (drug trafficking, weapons …), sheltered from companies-screens.
To which are added still too slow responses to the countries questioning the Panamanian authorities: thus, over the period of about three years that has been verified (from 1st April 2015 to March 31, 2018), during which 302 requests for information from 19 countries arrived in Panama, while 20% of responses were made within 90 days, 49% were received under one hundred and four twenty days, with incomplete information in almost half of the cases (140). Panama could not find the expected answer in 13% of the cases, and most of the time no accounting data existed.
Black and gray lists
"Panama was last on the list until" Panama Papers "and hesitated a few months on the strategy to follow, but it decided to change by changing its laws and agreeing to switch to the automatic exchange of information says the director of the OECD Center for Tax Policy and Administration, Pascal Saint-Amans. What this report shows is that the new standards are demanding and that we must continue to rise in rank. "
The poor quality of some responses to the requesting countries is due to the opacity that prevailed until the transparency laws adopted since 2017. It is, in fact, complicated for the offshore financial centers to clear their stock of illegal accounts and shell companies, and delisting or dismantling these entities takes time.
In the end, while Panama remains under the supervision of the FATF (Financial Action Task Force) – this international body has recently placed it on the gray list, to urge it to do more against money laundering and terrorist financing – the Bad report of the World Tax Forum is a challenge for the new left-wing government (Democratic Revolutionary Party, PRD), resulting from the May presidential election.
The fiscal transparency policy of the States serves as a criterion for ranking or not on the famous international blacklists of tax havens (states "non-cooperative tax," according to the diplomatic expression). However, if Panama has signed all the required OECD exchange agreements and is therefore not likely to be listed on the international organization's list, its bad rating could, in theory, require it to re-register on the European blacklist, or on a gray list. Black and gray lists that he recently released – for the blacklist in January 2018, and for the gray list in March. His fate will depend on future discussions with the European Union. The update of the European blacklist is expected at an Ecofin – meeting of finance ministers – in December.