By
Panama City — DESPITE their
name, the Panama Papers are not mainly about Panama. They are not even
primarily concerned with Panamanian companies. The more than 11 million
documents, illegally hacked and released last week relating to previously
undisclosed “offshore” corporations, is roiling the world with revelations of
the vulnerability for rampant abuse of legal financial structures by the
wealthy.
They are unfairly called the
Panama Papers because this particular trove of documents came from a single law
firm based in Panama. But the problem of tax evasion is a global one.
Panama does not deserve to be
singled out on an issue that plagues many countries. But we are willing to
accept the responsibility for fixing it, in part because greater transparency is
ultimately a continuation of reforms we have recently undertaken. The world
must tackle this problem collectively and with urgency, and Panama stands ready
to lead the way.
The scope of the information
is breathtaking: The files include information on more than 14,000 banks, law
firms, corporate incorporators and other middlemen from more than 100
countries, which is just a small part of a worldwide industry that harbors
trillions of dollars.
That some can rig the system
to hide their wealth is not merely unjust; it also harms global development by
siphoning off revenues that could be directed to education, health care and
infrastructure.
Contrary to media reports,
Panama does not make special allowances for “offshore” structures. The
association of Panama with offshore activities comes from the fact that we tax
only income derived from within Panama, not from without, which remains taxable
pursuant to the laws of relevant jurisdictions. These rules, based on laws in
New York and Delaware, originated in 1927 and are common today. While these
laws have been buttressed by additional regulations, they can still be
manipulated for illicit purposes.
Under previous governments,
Panama was no doubt a target of money launderers. Today, Panama is committed to
adopting all transparency reforms needed to satisfy the international
community. In the 21 months of my administration, Panama has taken steps to
increase the transparency and strength of our financial legal systems. We
developed a robust treaty network that allows exchange of information. “Know
your client” regulations were substantially enhanced and extended not only for
financial and corporate providers but also for key nonfinancial industries
vulnerable to abuse. And as of January this year, we require identity
certification of shareholders of all Panama companies.
I have announced a commitment
to the automatic exchange of financial and corporate information, and we have
proposed steps we believe are consistent with the goals of the international
community, including the Organization for Economic Cooperation and Development
through its Common Reporting Standards proposal.
These reforms have been
recognized and validated by the international community, including the
Financial Action Task Force on Money Laundering, which cited Panama’s
“significant progress” in combating money laundering when it removed us this
year from its “gray list.” Removal from that list occurred in record time.
Our financial transparency
ranking with the nongovernmental organization Tax Justice Network has steadily
improved since 2013, and we now rank well ahead of Japan, Germany and the
United States. We have also progressed positively in a peer review by the
O.E.C.D.’s Global Forum for Transparency and Exchange of Information for Tax
Purposes.
These reforms in Panama, along with other international efforts, have
been paying dividends.
Still, more work is needed. I
have announced that Panama’s Ministry of Foreign Affairs will create an
independent committee of international experts to evaluate our policies,
determine best practices and propose measures that will be shared with other
countries to strengthen global financial and legal transparency. We expect
their findings within six months.
Panama will continue to
cooperate with other jurisdictions to prosecute offenses outlawed in our
Criminal Code, and we will continue to exchange financial and legal information
to comply with the many treaties we have ratified. We also reiterate our
willingness to engage in dialogue with the O.E.C.D. and its Global Forum with
respect to reaching financial transparency agreements that can further the
economic development of our countries.
After decades of dictatorship,
Panama is a stable democracy committed to the rule of law and the regional
headquarters of more than 100 transnational companies. To fulfill our
democratic evolution, we must have a government committed to transparency,
accountability and the separation of powers. Our response to the current crisis
will test our resolve and our potential.
Juan Carlos Varela is the president of Panama.
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