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Panama Rumors. Panama Truth.
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| Thursday, December 8, 2005 - Vol. 7 No. 246 |
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In Today's Letter:
Comment: Panama Rumors. Panama Truth.
Offshore: A Hong Kong Reply. Canadian Gift?
Privacy & Rights: Unpopular Politics Not a Crime.
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Comment
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Panama Rumors, Panama Truth
Dear A-Letter Reader:
As happens from time to time, rumors cross my e-mail inbox, and some of them would be alarming if true. Often I'm able to scotch them at once, because we do keep up with what's happening in the offshore world.
Good example: yesterday a reader forwarded a communication from one of his agitated American clients who lives in Panama loaded with wild accusations about alleged harsh new tax laws in Panama that, if true, would have ended Panama as a tax haven. Aside from the fact that such tax law changes would destroy a large part of Panama's GDP and thousands of jobs that depend on the offshore sector, I didn't think President Martin Torrijos had suddenly gone mad.
We checked with our distinguished Council of Experts members in Panama, Derek Sambrook of Trust Services, and attorney Rainelda Mata-Kelly. We also asked for a response from our law firm in Panama, Mossack & Fonseca. They all responded quickly with the same answer -- no way!
Attorney Sara M. Montenegro of the MossFon law firm summed up the falsity of this rumor and explained why Panama continues to be out choice for one of the top tax and asset protection havens in the world. Sarah wrote: "In response to your email in which you requested some clarification about certain rumors pertaining to recent modifications and regulations in the Panamanian tax law, your assumption is right; the writer must be confused or misinformed, since none of the issues he has raised are correct."
Based on responses from attorneys Ms. Mata-Kelly and Ms. Montenegro and from Mr. Sambrook, here's an accurate description of current Panama tax laws as it pertains to offshore legal entities and foreign residents living in Panama:
RUMOR: "Panama is no longer a tax haven".
TRUTH: Panama's tax law remains strictly territorial, which means that incomes are taxed only if earned within the boundaries of Panama. Those Panama registered companies that do not generate income in Panama, do not have to file tax returns or pay any tax in Panama on their foreign income.
RUMOR: "There are no longer offshore companies - offshore industry is abolished".
TRUTH: Since the territorial nature of Panama's tax system has not changed, Panama's offshore industry remains intact. Panamanian companies continue to be broadly used and accepted overseas. The recent corporate tax legislation only raised the annual fee for maintenance by US$ 50.00, which is still competitive considering other offshore jurisdictions.
RUMOR: "Foreign pension income of retirees will be taxed".
TRUTH: This is simply not possible. In order to be taxable, a pension paid to a person living in Panama must come from a source within Panama (territorial tax principle). Regardless of the nationality, domicile or residence of the taxpaying person, incomes, of whatever kind, are only taxed by Panama if they are produced or generated within the national boundaries of Panama.
What really qualifies Panama as a "tax haven" is the fact that Panama has refused to exchange tax information with other countries in an automatic way. The OECD has been trying to force the so called "tax havens" - such as Switzerland, Luxembourg and Panama, among others - to enter into agreements for automatic exchange of tax information, fortunately without any success. Panama continues to preserve secrecy on tax and bank information because their laws require such secrecy -- and because they believe private financial matters are nobody else's business.
Keep those rumors coming folks. Accurate offshore information is one of the reason we're here.
That the way that it looks from here (and from Panama),
BOB BAUMAN, Editor
PS: If you have been considering a trip to Panama, either for investment or pleasure, now could be the pefect time to do it. Good friends of mine have just launched a website that could make your Central American adventure far more affordable than you ever imagined. If you have ever thought of traveling to Panama, either to Panama City, or perhaps to more remote areas of natural beauty, please take a few minutes to look over the following program to see how it could benefit you and your family. Visit: http://www.primapassport.com/?AID=24978
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Another View on the Hong Kong March
A reader writes from HK: "It seems like the only people impressed with the marchers (3.6% of the population...tyranny of the minority?) are the people NOT in HK. I saw it on CNN, got sick to my stomach thinking HK might become like the USA or Europe in the future and called people in HK. Most of them just laughed and quite a few didn't even know it happened. I noticed you wrote "...Sunday's outpouring of a quarter of a million marchers is a strong reconfirmation of Hong Kong's demand for freedom..." Frankly, I thought it was a "...strong reconfirmation of Hong Kong's freedom..." I am confident HK will remain a form of representative democracy for the near future. I hope to be gone by the time 'universal sufferage' destroys one of the world's greatest cities that achieved so much under a benevolent dictatorship and, in recent years, a form of representative democracy."
A Gift from Canada?
"Why does President Bush hope Christmas comes a little late this year? Because on Jan. 23, Canada may elect the most pro-American leader in the Western world. Free market economist Stephen Harper, leader of the opposition Conservative Party, is pro-free trade, pro-Iraq war, anti-Kyoto, and socially conservative. Move over Tony Blair: If elected, Mr. Harper will quickly become Mr. Bush's new best friend internationally and the poster boy for his ideal foreign leader. Both north and south of the U.S.-Canada border, this vote matters." LINK: http://www.cato.org/pub_display.php?pub_id=5237
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Jury Finds No Guilt in Unpopular Politics
OK, so let me issue the usual disclaimers before I give you my take on the US government's loss of a major so-called "anti-terrorist" prosecution case; I am totally in favor of any constitutional means to prevent and punish terrorism. I favor the existence of the nation of Israel and its continued success, and I abhor the irrational and murderous Palestinian attacks against Israel, although I certainly can understand there are two sides to this enduring conflict.
Having said that, I believe Americans concerned about their right of freedom of expression and the liberty to hold unpopular political views should be pleased that a jury in Tampa, Florida, failed to return guilty verdicts Tuesday on any of 51 criminal counts against a former Florida professor and three co-defendants accused of operating a North American front for Palestinian terrorists.
I have followed this case since it was brought to my attention by my friend and Sovereign Society founder, the late Bob Kephart, a decade ago. Even though he and I both disagreed with Sami al-Arian, a US citizen who has been an advocate for Palestinian causes, it seemed clear that he had not done anything illegal. In fact he was arrested and then released during the 1990's for supposed terrorist activities, then, after the passage of the PATRIOT Act, re-arrested and tried based on provisions in that misguided law that the government tried to apply retroactively. At issue were the Act's expanded search-and-surveillance powers.
I don't have the time or space to go into a decade of criminal litigation here, but as one of his defense attorneys said: "This was a political prosecution from the start, and I think the jury realized that. They looked at Sami al-Arian; they saw a man who had taken unpopular positions on issues thousands of miles away, but they realized he wasn't a terrorist. The truth is a powerful thing." LINK: http://www.nytimes.com/2005/12/07/national/
nationalspecial3/07verdict.html
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