“No More Tax Havens”- Panama is on OECD’s List

Nikolas Sarkozy at the Summit in Cannes

Just recently we were treated to yet another rash promise made by France’s President Nicolas Sarkozy’s that the G20 would not tolerate any more tax havens.

Sarkozy acknowledged the names of the known “tax havens” or paraísos fiscales on their much awaited “List.” Antigua, Barbuda, Barbados, Botswana, Brunei, Panama, Seychelles, Trinidad and Tobago, Uruguay and Vanuatu, were among the countries that the G20 identified as those not having yet established a legal framework to combat tax evasion or, at the very least, do their best to cooperate in identifying tax cheats.

“The G20 is not prepared to tolerate it,” said the Prime Minister at the end of the Summit this past Friday 4th of November, held in Cannes. These countries, he was adamant in pointing out, have not adopted a legal framework for exchanging tax information.  In addition, Sarkozy singled out Switzerland by promising to make this wealthy nation a “pariah” if it “did not stop helping EU tax payers hide money.”  Lichtenstein was also included in his admonition and said that these countries would “not be rated under phase II until certain deficiencies have been remedied.” French President referred to the publication of the list of those countries by the Global Forum and recalled on them “that they believe are tax havens”.

“We do not want more tax havens and countries which continue to be tax havens by the lack of bank transparency will be ostracized from the international community.  Things have come a long way,” the French leader added, “but they must make more progress still.”  At every Summit the G20 systematically publishes a list of countries who have not actively sought to comply with both Phase I and Phase II of international standards published by the OECD.

Panama is clearly included on this list.  You can see the list of Phase I recommendations here and just how Panama figures in it.  What will be interesting, however, is how Panama will work to meet international standards in view of the fact that she already signed an accord with the U.S. allowing for the exchange of tax information last year in 2010.  She did this much to the chagrin of many a local Law firm, banks and others since Panama gets only a Free Trade Agreement with the U.S.

The “List” of non-cooperating countries put up by the OECD has its proponents and also its detractors.  Markus Meinzer of the Tax Justice Network, an avowed anti-tax evasion supporter, couldn’t be happier with the more aggressive stance taken by France against Switzerland, but other EU nations such as Italy, Austria and Luxembourg threaten to block a revised Savings Taxation Directive, if Switzerland and the UK’s overseas territories (like the British Virgin Islands) are not covered.

Nick Shaxson who wrote Treasure Islands which reveals how tax havens in many ways caused the “financial crisis,” says that these OECD lists do “more harm than good” since they have a good example in the UK of a G20 nation which does not appear on “The List” but continues to tolerate bearer shares.  Bearer share is a legal maneuver to basically hide the real owner of a company by saying that the one who holds the physical share documents in his hands at any given time is responsible.

One way or the other, it appears as though Panama will have to revise its appealing offeringsto the world as a tax haven in view of the strong handed methods to eradicate these practices by the members of the G20.

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