For tax evaders and average blue-collar workers in the U.S., things just got a little more difficult.
On Tuesday, the governments of Panama and the U.S. signed a tax accord that will allow them to share tax information, and may also pave the way for the passage of a long-stalled trade agreement between the two nations.
"Upon entry into force, the new [agreement] will provide the United States with access to the information it needs to enforce U.S. tax laws, including information related to bank accounts in Panama," the Treasury Department said.
The deal allows for the exchange of tax information on individuals and corporations dating back to the tax year of 2007, according to reports. The information could be asked for in both criminal and civil matters.
In recent years, Panama has signed similar deals with Belgium, the Netherlands, Spain and Mexico to try and shed its label as a well-known tax haven.
Recently, it was one of just13 countries listed on all of the major tax-haven watchdog lists that also does not have U.S. tax transparency treaties. Panama also happens to be the only country on that list that the American government is currently seeking to finalize a “free trade” agreement with.
A report by the U.S. Public Interest Research Group Education Fund found that the U.S. Treasury Department loses approximately $100 billion each and every year due to American businesses utilizing tax havens.
It is unknown how much of that winds up in Panama, where 350,000 foreign subsidiaries are located in the country to take advantage of the nation’s lax tax laws, usually in the form of offshore shell companies and fake headquarters. That makes it the second most popular destination in the world for multinational corporations seeking to avoid taxes, behind only Hong Kong.
Despite the obvious failings of signing a free trade pact with a nation widely regarded as a safe haven for people and businesses looking to hide their money from the government, free trade proponents say now is the time to finalize the agreement.
"The fact that we have now signed a Tax Information Exchange Agreement with Panama should remove any remaining hurdles to moving forward with this important trade agreement, something we should do as soon as possible," Rep. Dave Camp (R-MI) said.
The trade pact, which was negotiated in 2007 under the Bush administration, has been ratified by the Panamanian Congress, but stalled in the U.S., where Democrats had demanded greater transparency from Panama.
Panama President Ricardo Martinelli believes that now that U.S. lawmakers have that, the agreement is bound to become law.
"This new tax accord moves us closer to final approval of a trade agreement between our countries that is vital to our economies – especially at a time when the United States is trying to increase exports. The free-trade agreement we negotiated, and which Panama has approved, would make over 88 percent of U.S. consumer and industrial exports to Panama duty-free immediately, with the remaining tariffs phased out over 10 years,” he said.
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