Regulate data exchange


Financial institutions are obliged to provide information about foreign to the Directorate General of Revenue (DGI) customers and will be exposed to penalties if they do not.

A bill submitted to the National Assembly this week by Ivan Zarak, Deputy Economy Minister creates the legal framework to meet the exchange of financial information, a commitment by Panama with the international community and commitment embodied in various agreements.

After meeting last April that political leaders, athletes and entrepreneurs from around the world have used offshore companies created by the Panamanian law firm Mossack Fonseca to supposedly hide fortunes to the tax authorities of their countries, the Organization for Cooperation and Economic Development (OECD) and some of the countries that are part of this group increased pressure to Panama strengthen the transparency of its financial system and legal services.

Since then, the government has adopted a series of measures and made commitments in this line, such as accepting the exchange of information automatically from 2018, following the standard OECD, and announced its intention to sign the Convention on Administrative Assistance mutual in Tax Matters in this line, which will involve more than 100 countries will be entitled to request information on accounts of its citizens in Panama.

In addition, there is already an intergovernmental agreement between Panama and the United States to start the automatic exchange of information in September 2017. It has also sealed a similar pact with the Government of Japan and is negotiating a third with Germany.

In order to respond to these commitments, the bill creates the regulatory framework for the exchange of information. The Global Forum on Transparency and Exchange of Tax Information, which Panama is a member, has made several recommendations to the country, among which is “the need to give greater coercive DGI powers as competent authority, that allow obtaining information for tax purposes “includes the preamble to the bill.

Zarak told this newspaper that, in the case of exchange of information prior request, the data will be collected by the DGI of different sources of information and exchanged with another country, provided that there is a request according to current tax agreements. In the case of automatic exchange, financial institutions shall request information after applying a due diligence process and automatically provide annually to the DGI.

Zarak explained that “the DGI as the competent authority already has powers that allow you to access information held by banks. The project empowers the DGI to punish those sources of information for failing to provide any information required under a tax convention “.

Who will be required to give information? The entities engaged in financial activities involving collection or custody of third party funds. The project also speaks of “private sources” in reference to natural or legal persons who may have the required information, such as banks, other financial institutions or resident agents.

The DGI will conduct on-site inspections at the offices of these private entities “or any other place where sit the information that must be provided” out in Article 4 of the bill.

Panamanian financial institutions are subject to fines between $ 5,000 and $ 50,000 if they do not fulfill their obligations under the law.

Asked how affects this legal proposal to the bank reserve that exists in Panama, Zarak said only the tax authorities can access the information and that this can only be given to fiscal counterparts from countries with which there is an agreement to exchange information . “The information is not going to be in the public domain,” he said.

Moreover, the Panamanians data will not be shared with other jurisdictions “unless that Panama is taxed in another jurisdiction.”

In the case of Panamanian companies in which the beneficiary is a foreign person, the responsibility to know the origin of the shareholder or beneficial rests with the financial institution. The same applies to the private interest foundations. Zarak said that “banks and securities houses and collect that information under the current regulation.”

Some sectors noted that changes in the model that implements the Government may have an impact on the competitiveness of the financial and service center of Panama. Consulted, Gustavo Villa, secretary general of the Superintendency of Banks, said the issue has been studied and is not expected to have a material impact in the form of capital flight.
Panama is in a relationship published by the European Commission as “a first step” towards a “black list” of tax havens published by the end of 2017. “The list of the European Union will be our tool for dealing with third countries that refuse play fair, “said the European Commissioner for Economic and Financial Affairs, Pierre Moscovici, quoted by AFP. In addition to Panama, the list includes Brazil, Costa Rica, Peru, Colombia, Canada, Uruguay and the United States, among others.

The Commission said the results are not sufficient to have conclusions on the inclusion in the list, but is “a robust source of information produced by the Commission to assist Member States in the next steps of a process common list “.

Deputy Economy Minister Ivan Zarak, said “it is a fairly extensive list that we understand more than 80 countries. The information we have is that Panama does appear on that list, like the United States, Japan, Australia, among others. Judging by the number of listed countries, it seems that most are countries that are not part of the European Union “.

Panama is also exposed to appear on another list drawn up by the Organisation for Economic Co-operation and Development (OECD) on tax havens published in July 2017. Commitments to exchange information automatically according to the OECD standard and the multilateral convention to exchange upon request play for Panama to avoid getting into the list. But the result will be a key country in the second phase of the peer review of the Global Forum on Transparency and Exchange of Tax Information.

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