Panama is back on EU grey list: Economic activity fails to rebound


By Caribbean News Now contributor

PANAMA CITY, Panama — The Panamanian business sector assures that the efforts and results that have been achieved in such a short time have not been recognized by the Financial Action Task Force (FATF), deciding to put the country back on the grey list, at a time when economic activity fails to rebound. Year-on-year variation in economic activity fell from 3.7 percent to 2.9 percent between February and March; the rise in April was again 2.9 percent.

Earlier this year the European Union (EU) Commission established on the basis of an analysis of 54 priority jurisdictions the EU had constant investigations on placed Panama on the blacklist of countries and territories. 

Although at the beginning of the year efforts were made in the country to improve controls in relation to tax evasion, as in the case of the approval by the National Assembly of the bill criminalizing tax evasion, when the amount defrauded in a fiscal period of one year is equal to or greater than $300,000, it was not enough for the country to return to the FATF grey list.

Nevertheless, the business sector rejects the new inclusion made to Panama in the list of nations that need to be supervised in the process of implementing measures to prevent money laundering and financing of terrorism, arguing that “private and government sectors have worked hard to strengthen their legal, regulatory and institutional framework with the adoption of norms aligned with international standards.”

For more than a year the country has been debating the importance of this law to prevent Panama from falling back on the list of FATF.

The ministry of economy and finance considers that it is necessary for Panama that the National Assembly approve the law that increases tax evasion to a criminal offence and as a precedent for money laundering.

The Financial Action Task Force for Latin America (GAFILAT) analyzed during its plenary meeting in Quito, Ecuador, Panama’s technical progress in closing gaps to comply with the FATF recommendations identified in the Mutual Evaluation Report (MER) published in January 2018.

In January 2019, Panama, strengthened penalties against tax evaders. Project 591, criminalizes tax evasion in the Criminal Code and is considered a crime resulting from money laundering. 

“The project establishes in article 288 G that anyone who, for personal benefit or the benefit of a third party and with the intention of committing tax fraud against the National Treasury, affects the correct tax determination to stop paying all or part of those taxes, shall be punished with a prison sentence of two to four years.”

The ministry of economy and finance explained in a statement that “… this law punishes the great evader who harms the Treasury by intentionally defrauding for more than 300,000 balboas, this being a taxpayer with taxable income of more than 1.25 million balboas per year.”

The minister, Eyda Varela de Chinchilla, detailed that “… This project, presented and promoted by the ministry of economy and finance, will not have an impact on most Panamanian taxpayers, as only 81 legal entities are included in this range of taxable income.”

In a statement last week the Chamber of Commerce, Industries and Agriculture of Panama (CCIAP) said it rejects the unfortunate decision to include the country on the list of nations that need to be supervised in the process of implementing measures to prevent money laundering and terrorist financing that was issued by FATF.

The private and governmental sectors have worked hard to strengthen their legal, regulatory and institutional framework with the adoption of norms aligned with international standards and inclusion on the list does not recognize all the effort and results achieved in a relatively short time.

“Panama is taking steps in the right direction in a consistent manner and the message that FATF sends to the country with this measure is nefarious since it has a demoralizing effect on the effort required to promote all the changes implemented,” said Jorge Juan de la Guardia, president of CCIAP.

“Not knowing, at this moment, all the actions implemented by the country is unfair. We are closing a governmental period that proceeded with the revision of the legal and regulatory framework; while it took the first steps for its application. We are currently about to begin a new administration that must reinforce compliance.”

As the country’s main guild, CCIAP will analyse in-depth the arguments put forward in this new report; however, given the negative connotations that inclusion on the list generates. 

The guild cannot fail to send its message of dissatisfaction and frustration at the FATF decision.

“All the country’s productive sectors, both public and private, must join forces and propose a communication and lobbying strategy that will present to our counterparts all the progress made in recent years, as well as the work we continue to do to adapt our system for the prevention of money laundering and the financing of terrorism, among other crimes,” said the president of CCIAP.

The monthly Index of Economic Activity (IMAE) in the Republic grew by 3.29 percent for January-April 2019 compared to the same period in 2019. The monthly year-on-year variation referred to April 2019 was 2.94 percent, compared to its similarity of the previous year, reported the general comptroller of the Republic.

The document states that ” … Among the categories of economic activity that presented a good performance were: transportation, storage and communications, financial intermediation, electricity and water, public administration and construction.

Transport and communications services showed positive behaviour, thanks to the performance of the Panama Canal, the movement of containers of the National Port System in TEU; likewise, telecommunications and international passenger transportation by air.

The category of electricity and water supply, in its production, showed positive results because of the greater generation of thermal energy and the contribution presented by the new generation of energy from natural gas. Other activities that showed slower growth were mining and quarrying, real estate activities, trade and hotel and restaurant services.”

The coordinator of Macroeconomic Analysis of the Central American Institute of Fiscal Studies (Icefi), Abelardo Medina, said that it is “essential to improve the efficiency of the tax system” of Panama, consequent on “an increase in the fiscal deficit and therefore of the debt,” approaching dangerous levels of 40 percent of GDP.



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