What will Ricardo Martinelli’s election as the new President of Panama mean for the offshore banking sector and Panama’s tax haven status? Will Panama IBCs and Corporations still be attractive tax planning vehicles? Will Private Interest Foundations remain inpenetrable?
The election of a self-made multi-millionaire as Panama’s new President this last weekend is good news for anyone thinking of doing business in Panama’s booming offshore sector. “Super 99” Supermarket tycoon Ricardo Martinelli beat socialist Balbina Herrera who was intent on raising taxes and threatened changes to Panama’s traditional laissez-faire approach to government.
Martinelli is a business friendly conservative who understands the need for fiscal discipline, says Reuters. What we particularly like about him is his money is not from family or government. He is a self-made millionaire who has been there, done that, seen hard times and survived – the real archetypal tycoon.
He was almost bankrupted by looting at his supermarkets after the US invasion of Panama in 1989 but since then he has built up business interests also in real estate, hydro electric energy (very smart guy), and sugar. The Panamanian electorate has bucked the recent trend in Latin America towards left-wing governments, showing once again that Panama is a business friendly country.
Needless to say, Martinelli is keen to court the Obama administration, given the importance of US trade with Panama. In common with what’s going on in the rest of the world, Panama is likely to loosen up bank secrecy somewhat over the coming years. Despite their committments to the G20 and OECD, we know the Panamanians will deliberately move slowly on this. But it is coming.
On the other hand, a closer relationship with the US, which Martinelli is seeking in the scope of a Free Trade Agreement, also stands to benefit the offshore sector through increasing opportunities for legitimate international tax planning. (See yesterday’s article about the enormous tax benefits US tax law actually allows for offshore business, especially in the pharma and tech sectors, and for high net worth individuals)
Indeed, the anti tax haven crusade is already getting worried about this prospect and cranking up the publicity… something that can only be a good sign for supporters of the right for individuals to do what they like with their own money!
The Tax Justice Network, in a recent article called Grimy Panama, describes Panama as an “especially unpleasant secrecy jurisdiction,” pointing out that unlike most tax havens and even their bete-noire Switzerland, Panama does not have any tax or information exchange treaties. Furthermore, they point out, “The OECD notes that Panama made a commitment in 2002 to conform to international tax norms but since has completed not a single agreement to implement its promise.”
Another report claims that this Free Trade Agreement between the USA and Panama, which comes much closer with the election of Martinelli, would “undermine U.S. efforts to stop ofshore tax-haven abuse.” Apparently, these people have some problem with Panama trying to create a “comparitive advantage” for itself through regulation of financial services… while in the almost the same breath they suggest that the USA should seek to gain what could only be described as a comparitive advantage for itself, by putting up legal and fiscal barriers to American companies wishing to do business overseas. Finally, needless to say, they throw in accusations of money laundering on behalf of American International Group, Mexican and Colombian narcotraffickers.
Bottom line? The socialists are worried because events in Panama and the possibility of a Free Trade Agreement would give Panamanian companies better access to US markets on more preferential terms. That could open up exciting new possibilities for paying less tax legally.
We are pleased to welcome Ricardo Martinelli as the new Panamanian President, and take this opportunity to remind readers that we are now offering a free e-book “Eight Important Things You Should Know Before Doing Offshore Business in Panama.” Because the business culture in Panama is different, the way of doing things may not be what you are used to, and there are certain ways of getting things done (or conversely doing things the wrong way) that might surprise you. Download your e-book now, here: Panama Corporations and Banking – Hidden Truths Revealed.