By
In 2009, leaders of the Group of 20 nations, distressed by the global financial crisis,
pledged to dismantle the tax havens that have allowed the world’s richest
people to avoid paying taxes. The United States and European governments were
equally concerned about banks being used by tax cheats and criminals in a
shadowy international financial system.
In response, most nations have taken significant steps
to make it harder and riskier to hide money overseas. The leaders of 132 nations have
agreed to adopt an information-sharing standard developed by
the Organization for
Economic Cooperation and Development. Of those, 96 are expected to
start sharing banking information over the next
couple of years through an automated system designed to allow the tax
authorities of participating governments to see the overseas holdings of their
citizens. But one major international financial hub has refused to sign on — Panama.
The recent leak of millions of documents from the
Panamanian law firm Mossack Fonseca, which specializes in enabling shadowy overseas
transactions, may change that. President Juan Carlos Varela of Panama announced Wednesday that his government will appoint a team of local and
international experts to propose measures the country can take to “strengthen
the transparency of the financial and legal systems.”
A wholesale review of the legal and financial systems
of a country that has enabled money laundering and tax evasion is certainly
welcome. It is no coincidence that thousands of government officials and
magnates from around the globe have turned to Panama for ways to hide their
cash. But the government doesn’t need a committee to recommend that it adhere
to the international information sharing standard or to sign the Convention on
Mutual Administrative Assistance in Tax Matters.
In recent years, Panama has tried to shed its status as a tax haven by, for example,
negotiating bilateral tax information sharing agreements — including one with the United
States. In 2014, it adopted new banking policies designed to
make it harder to establish anonymous
business entities. Panama
had also agreed to adopt the international data sharing standard, but it
recently changed that position, saying it was not ready to comply with all the
requirements, the O.E.C.D. reported
in February. On
Wednesday, however, Álvaro Alemán, the Panamanian cabinet chief, said that
there were no “irreconcilable differences” with the O.E.C.D., and that the
government was ready to find a way to cooperate.
Officials in Panama have pointed out that the American
banking system has not been a model of transparency either. They are right. The
United States remains one of the world’s top tax havens. Several states have
eagerly attracted foreign capital by making it easy to set up shell
corporations and other legal entities that hide the identities of the owners.
While the United States government has taken some
steps to address this problem, they have been insufficient. The Obama
administration intends to adopt new
rules that
would close loopholes by forcing banks and financial institutions to learn the
identity of customers who set up accounts in the name of shell companies.
Washington has negotiated bilateral agreements with
several countries, including the Bahamas and the Cayman Islands, to exchange
tax information upon request. Unfortunately, recent tax treaties the United
States has negotiated with several countries and a proposed amendment to the
Convention on Mutual Administrative Assistance in Tax Matters remain stalled in
the Senate because of privacy concerns and fears that
financial data could be compromised. While these concerns are worthy of
attention, they should not block change to a system that has made tax evasion
easy.
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