TAX NEWS - JUNE 2010

Panama Offshore Asset Protection

Often when I am on the road, at conferences or other travel, Sovereign Society members, A-Letter or blog readers say to me: "Well, I know Panama is your favorite offshore country."

In many respects, that is true, whether you're looking for a retirement or second residence, a tax and/or asset protection haven, or a base for your business, trust, private family foundation or for private banking – Panama is the place.
 

Leading World Hot Spot
 
As I have noted before, history and events within Panama have come together in the year 2010 to make this crossroads of the world a major media hotspot.

Reuters, reporting from Panama City on May 28 (Panama harbors ambitions beyond its canal), described the situation thusly: "A generation after Panama shed a tradition of military rule, canny fiscal management and good stewardship of its emblematic canal have made the tiny country a model of success for today's frontier markets." (I urge you to read the entire article).


Expansion & Fiscal Stability

Reuters also takes note of the fact that Panama's government debt now has received a coveted "investment grade" rating by Fitch and S&P, confirmation that President Ricardo Martinelli's (right) conservative fiscal and tax policies are headed in the right direction.

Add to that the US$5.25 billion expansion of the canal to be complete in 2014 and planned government expenditures for another $13.6 billion on infrastructure and social programs in the next four years. And Panama even has managed to dodge recession during the recent global downturn, although the real estate bubble has deflated noticeably. Added to the established Atlantic side Free Zone, two new mega-ports are planned for the Pacific side.

Not to ignore the many problems yet to be solved. While the economy has been growing at breakneck speed, the poverty rate only dropped from 36.8%t to 32.7% between 2003 and 2008.


Financial Privacy

And while formerly staunch defenders of financial privacy, such as Switzerland, Liechtenstein and Austria, all have weakened their former strict bank secrecy, concerted pressure has been aimed at Panama, one of the last nations with the political courage to stand firm for the right to financial privacy.

The Martinelli government strategy has been to negotiate at least 12 double taxation agreements with Organization for Economic and Community Development (OECD) member countries, in order to have Panama removed from the OECD "grey list," possibly by the end of this year.


Off the Grey List

As of now the government successfully has negotiated and signed double taxation treaties with Belgium, Italy, Qatar, Netherlands, Barbados, Spain, France and Mexico. Negotiations with Luxembourg are underway. The country is awaiting confirmation of talks with South Korea, India, Japan, Switzerland, Israel and England. Significantly, the United States is not on that list.As we know, what the OECD radicals want is automatic tax and financial information exchange, and they're still working feverishly toward that goal.

Panama cleverly is signing bilateral tax treaties that provide a method to avoid double taxation of the same personal or corporate income earned by an individual with ties to both countries.
 
As an example, I have read all 18 pages of the Panama-Mexico tax treaty, typical of all these agreements. I can assure you that document not only does not allow automatic tax information exchange, it specifically reaffirms existing strict Panamanian bank secrecy laws.