Caribbean & Central America - June 2016 (ISSN 1741-4458)

President Juan Carlos Varela is continuing in his efforts to restore credibility to Panama’s image which was recently damaged by two major scandals. These were the US government’s decision last month to blacklist the Waked family, one of Panama’s most important business groupings [RC-16-05] – along with the ‘Panama Papers’ [RC-16-04], the biggest leak of secret information in history which exposed the internal operations of a locally-headquartered law firm dedicated to the incorporation of offshore entities.

On 17 May, an official delegation headed up by Panama’s deputy foreign minister, Luis Miguel Hincapié, travelled to Paris to meet representatives from the Organisation for Economic Co-operation and Development (OECD) and discuss financial transparency-related issues. Following the meeting, the foreign ministry announced that starting in 2018, the Panamanian government will begin implementing the Common Reporting Standard (CRS) of the OECD Global Forum through bilateral agreements. According to a Panamanian foreign ministry press release, the OECD agreed to offer “all the necessary technical assistance for the implementation of new laws and technological systems required by the automatic exchange of information”.

Also indicative of these efforts, on 20 May an official delegation from Japan arrived in Panama to begin negotiations on a new bilateral Tax Information Exchange Agreement (TIEA), which will be based on the CRS. These talks, which followed a visit by President Varela to Japan in April, follow announcements of other tax information-sharing deals in the pipeline. These include plans to ink a deal with Colombia, which was announced on 28 April, while the previous day Panama signed an agreement with the US to implement the Foreign Account Tax Compliance Act (Fatca) – a legal instrument for the automatic exchange of financial information between both countries.

WTO rules against Colombia

The Varela government received a recent boost after the World Trade Organization (WTO) issued a ruling on 7 June in favour of Panama in its complaint against Colombia's use of high import tariffs on textiles, clothes, and shoes to tackle alleged money laundering.

Panama filed the complaint in June 2014 in response to a compound tariff imposed by Colombia in January 2013, consisting of a 10% ad valorem component and a specific component, which varies according to the import value and customs classification of the merchandise.

The WTO press release notes that Panama challenged the compound tariff in certain situations where, “in its view, the measure necessarily results in duties in excess of those set forth in Colombia's Schedule of Concessions (35% or 40% ad valorem, depending on the product)”. Colombia had argued that the imported goods constituted “illicit trade” because they were imported at artificially low prices in order to launder money and that that should vindicate its use of a higher tariff than permitted under its WTO agreement.

In November 2015, the panel established by the WTO Dispute Settlement Body (DSB) to review the case issued its report which upheld Panama’s argument. In January 2016, Colombia appealed the report, prompting the WTO panel to issue its final ruling this month.

• Bilateral agreements

In a foreign ministry press release, Panama’s deputy foreign minister, Luis Miguel Hincapié, said: “We will continue to negotiate additional bilateral agreements in accordance with the OECD's Common Reporting Standard, including with countries such as Singapore and Germany, which expand on existing commitments of a similar nature with other relevant partners.”