Panama, a popular tax haven, has decided to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC), which is now seen as “gold standard” for co-operation in tax administration.

Taking a significant step forward in implementing its commitment to tax transparency, Panama on July 15 conveyed to the OECD, a club of rich nations, its intention to form part of the convention.

However, under the MAC, Panama will not take up information exchange obligations automatically, but on request, extending the network simultaneously with some 100 countries.

The commitment to automatic exchange remains only with those countries with which Panama decides to do so bilaterally, according to Panama Government. Reacting to this development, Pascal Saint-Amans, Director of the OECD’s Centre for Tax Policy and Administration said: “We very much welcome Panama’s request to join the Convention. Signing and ratifying the Convention will be a very significant step forward in implementing its commitment to tax transparency and effective exchange of information”.

The MAC is the most comprehensive multilateral instrument available for all forms of tax co-operation to tackle tax evasion and avoidance, and guarantees extensive safeguards for the protection of taxpayers’ rights. Already 98 other countries including India and jurisdictions have joined the Convention.

Closely behind British Virgin Islands, the Central American country of Panama has been the second most popular domicile for the anonymous shell companies controlled by the rich and famous including national leaders and celebrities, the recent expose of financial documents, dubbed ‘Panama Papers’ showed.

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