Time for Panama to put its house in order: OECD

As the furore over Panama Papers grows bigger, the OECD, a club of rich nations, has called upon Panama, a popular tax haven, to “immediately put its house in order” and adopt emerging global standards on exchange of tax information.

“Just a few weeks ago, we told G-20 Finance Ministers that Panama was back-tracking on its commitment to automatic exchange of financial account information. The consequences of Panama’s failure to meet the international tax transparency standards are now out there in full public view,” said Angel Gurria, Secretary-General, OECD.

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.

Gurria noted that Panama is the last major holdout that continues to allow funds to be hidden offshore from tax and law enforcement authorities.

Panama has been holding out against the Common Reporting Standards (CRS) championed by the OECD. The CRS — approved by OECD in 2014 — basically calls upon jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis.

The “Panama Papers” revelations have shone the light on Panama’s culture and practice of secrecy, he said.

Gurria said that the OECD has been leading a global crackdown on these practices since 2009, working hand-in-hand with the G20.

“Through the Global Forum on Transparency and Exchange of Information, we have constantly and consistently warned of the risks of countries like Panama failing to comply with the international tax transparency standards,” he said.

While the “Panama Papers” data expose nefarious activities, they also show a decline in the use of offshore companies and bearer share companies, Gurria said.

This is a testament to the incredible transformation effected in the last 7 years to establish robust international standards on tax transparency, including on beneficial ownership.

As many as 132 jurisdictions have committed to the standard on exchange of information ‘on request’. Of those, 96 jurisdictions will introduce automatic exchange of financial account information within the next 2 years. Almost 100 jurisdictions have joined the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

“As a result of our in-depth peer review process, the use of bearer share companies is close to being eliminated across the world, and the beneficial ownership rules have been strengthened to ensure that information is now available to tax authorities when they need it,” he said.

The OECD Secretary General also said that establishing global standards and making commitments are just the start though.

“Effective implementation is the key to lifting the veil of secrecy once and for all and eradicating tax evasion. The time has come to make sure that no jurisdiction can benefit from failing to meet their commitments,” he said.

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