NATIONAL BAR ASSOCIATION OF PANAMA
CNA-342-7-09
Panama, July 6, 2009
Dear Madam Ambassador:
The National Bar Association of Panama has thoroughly analyzed the letter you sent to the American Chamber of Commerce (ANCHAM) and USPA, as well as the point of view stated by your Government regarding Panamanian policy for attracting capital. As a result of this analysis, we feel compelled to send you this note so the juridical and economic reality of Panama may be better known through your conduct by your Government.
In the first place, we refer to the pressure placed by the Government of the United States on the Government of Panama to amend its Corporations Law, for the purpose of removing or immobilizing bearer shares. We understand the interest of the United States in this matter arises from the need to identify the shareholder or shareholders or beneficial owners of a particular Panamanian company, in the event said company is used for illegal activities. In such respect, we consider it incorrect for your Government to ask from ours what it does not do within its own territory.
Indeed, on the date of your letter, the United States Senate held a hearing to determine the feasibility of a bill previously rejected by the Senate but introduced again by Senator Levin for the consideration of his colleagues. The purpose of such bill is to ensure that the different States of the Union establish mechanisms to know the actual owners of limited liability companies or LLC’s, which companies are incorporated without requiring any disclosure as to the identity of those who present themselves as applicants.
As concluded from a transcript of the hearing, which may be found at the following address, https//hsgac.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=5el9c266-7210-4Sea-992F-6a6d5717c4ef, the United States is far from being transparent on these issues and officials from your own country characterize Panama as a jurisdiction they aspire to imitate.
Panama already has a law that imposes on Resident Agents (who must be lawyers and are the only ones allowed by law to incorporate companies in Panama) the obligation to know their clients through a due diligence process (Executive Decree No. 468 of September 9, 1994). This is why whenever a Panamanian company is used for international illegal activities, the criminals behind such actions are usually identified. If you know of cases where this has not been possible, we would appreciate letting us know in order to improve this system.
In second place, we refer to the tax information exchange issue that, according to some media outlets, has also been requested by your government to the Panamanian government as a prior condition for the approval of the trade promotion agreement by your Legislative Branch.
On this point again, the United States asks us to do what it is not willing to do itself. In fact, as you should know, your government tried to approve in Congress a law that made it mandatory to identify persons who invest in securities in the United States through banks and other financial intermediaries. This bill was defeated because of the opposition of financial intermediaries – mainly banks – who argued with reason that said measure would scare away investment in the United States and have considerable adverse consequences on the economy.
The United States has kept a system by which foreign financial intermediaries who make transactions with your country, maintain the confidentiality of investors, provided that they are not US residents or citizens. The purpose of this policy is to attract tax-free foreign capital, keeping the anonymity of the investor vis-à-vis the US tax authorities. In doing so, when a country requests tax information on its nationals to the United States, the United States is unable to provide it as it has no knowledge of the investor’s identity.
The Panamanian Bar Association is of the opinion that in this matter the United States does the right thing. That is, it has an aggressive policy to attract foreign capital (free of taxes) guaranteeing investment anonymity. This is the same thing that Panama does (except that Panama is not a tax haven because we adopt a general application policy while the United States discriminates between nationals and foreigners); this is why we do not understand your country’s reasons for seeking to prevent Panama from applying the same policy.
In fact, we believe that it will be much more productive for our countries to enter into an alliance to fight for the right of all nations of the world to use their tax policies to attract foreign capital. This includes confidentiality in the face of governments that are abusive because of both their tax rates and their confiscation policies, as is the case in some parts of Latin America.
This alliance should take a stand against the attempts of all other countries to avoid tax competition and, in particular, against initiatives advanced by the rampant bureaucracy of the Organization for Economic Cooperation and Development, which has declared war against tax policies the purpose of which is to attract foreign capital; a war that, although for obvious reasons it has not yet been expressly stated, will eventually affect your country.
Sincerely yours,
(Signed) illegible
Martha Lopez de Martín
President
The Honorable Barbara Stephenson
U.S. Ambassador to Panama
/seal/ National Bar Association – Panama
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