Posts Tagged Panama offshore services

We are constantly being asked by potential and some existing clients concerning information they see on a (former) competitor’s website proclaiming the end of Panama offshore services as we know it because of the Tax Information Agreements that many offshore jurisdictions are signing. Until recently they were incorporated here in Panama as a law firm and have now moved their operation to Guatemala on the premise that they do not feel that a small country like Panama can withstand the demands of the OECD countries and their desire for greater tax transparency. Moreover, they are counseling everybody to pull their funds out of Panama banks, or a Panama foundation if they have one, as they are predicting a liquidity crisis before long once Panama supposedly completely caves in.

However, we would not counsel such a rush to judgment. Our last blog stated clearly the position of Panama’s previous outgoing government. The new incoming government led by Hugo Martinelli is, as predicted, looking at ways of appeasing the OECD demands, appearing to be cooperative, but doing as little damage as possible to the offshore financial industry. A clear lead in this came in yesterday’s article in La Prensa which this former Panama law firm interpreted to be the end of financial privacy in Panama. “Panama banking industry given 15 days to open their books” screamed the headline on our former competitors website but in reality the La Prensa article was titled as “Panama should define within 15 days the policy the country will follow to defend its international and financial services”. That is quite a difference.

Actually the article shows that in fact our new government is taking the lead in proposing Double Taxation Agreements with individual countries rather than the more damaging Tax Information Sharing Agreements, which this former Panama based firm is assuming will be the inevitable outcome. The complete English texts can be seen on Panama Guide’s website plus the site author’s own pertinent comments which clearly shows Panama is not about to cave in any time soon: http://www.panama-guide.com/article.php/20090719104705657.

What is clear here is that Panama is not going to destroy the underpinning of its incredibly successful offshore financial services platform which accounts for at least 20% of its economy. There is a lot at stake here, and even assuming every other offshore jurisdiction throws in the towel, they are more than likely to move cautiously in relinquishing any of the features that make Panama attractive as an offshore haven. Expect to see some tinkering around the edges but don’t expect any real substantive changes.