Six months after the Panama Papers revelations, Panama signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters last week, making it the 105th jurisdiction to join the predominant instrument for transparency and combating cross-border tax evasion.
Panama was one of the few main offshore financial centers that was not a signatory to the convention when a leak of internal client data of Panamanian offshore law firm Mossack Fonseca was revealed by world media in April.
The Organization for Economic Cooperation and Development, which spearheads the convention and international efforts to curb tax evasion, said the signing shows that Panama is now implementing its commitment to fully cooperate with the international community on transparency.
“Panama’s decision to sign the multilateral Convention is a confirmation of its commitment to take the necessary steps to meet international expectations in the fight against tax evasion,” OECD Secretary-General Angel Gurría said during a signing ceremony with Panama’s Ambassador to France, María Del Pilar Arosemena de Alemán. “It also sends a clear signal that the international community is united in its efforts to stamp out offshore tax evasion. We will continue our efforts until there is nowhere left to hide.”
The Global Forum on Transparency and Exchange of Information for Tax Purposes is expected to publish this month a peer review assessment of how Panama’s legal framework and practices over the last three years match up against existing international standards of transparency and exchange of information on request.
“The forthcoming report will reflect Panama’s past record on transparency issues. Today’s signing, combined with very recent legislative changes opening the door for wide-ranging international cooperation, illustrates the good disposition and commitment by Panama to move forward in the area of tax transparency,” Mr. Gurría said.
The convention governs all forms of administrative assistance in tax matters, including the exchange of information on request, spontaneous exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection.
It guarantees extensive safeguards for the protection of taxpayers’ rights. It also allows automatic exchange of information on option.
The global convention is seen as a critical instrument for swift implementation of the new standard for automatic exchange of financial account information in tax matters developed by the OECD and G-20 countries and slated to go into effect from 2017. It will also be critical for implementation of automatic exchange of country by country reports under the OECD/G-20 Base Erosion and Profit Shifting (BEPS) Project.