¿Competencia fiscal o competencia comercial?

By Carlos Ernesto González Ramírez

Published on La Estrella de Panamá

April 30^th, 2013

For over a decade Panama has suffered the attacks of the Organization for Economic Cooperation and Development, an international organization formed by a group of countries to which Panama does not belong, dedicated to ensure the economic development of its members, as its name explains.

Although the OECD argues that it attacks Panama to prevent tax evasion by the taxpayers of its member countries, the truth is that it actually attacks us to avoid the commercial competition that Panama and other countries represent due to the uptake of international capitals. I make this statement based on the incongruity of the message OECD itself.

Indeed, the leading countries of the OECD (U.S. and the EU) for years have promoted international openness and trade liberalization. More recently they have indicated that trade protectionism should be rejected because this would negatively affect the world economy. Parallel to this, some members of the OECD, most prominently the U.S. and the UK, maintain differential tax regimes for domestic and residents versus non-resident foreigners, tax exempting the latter, while maintaining fiscal and economic information reservation mechanisms for these people.

In fact, the U.S. cannot, by reason of their constitutional law and economic interest, exchange economic information of any person without a court order based on strong evidence that points to the commission of a crime (which may be a tax offense). The economic interest in attracting international capital is so great that when the U.S. Treasury tried to promote legislation that would force the country’s banks to exchange information with foreign countries about the interest that banks paid to nationals of those countries, the banking system and an important sector of the U.S. Congress opposed and defeated the initiative demonstrating the impact it would have on said system in the country.

This situation contrasts with what has happened recently with the G-20, whose meeting launched the idea of ​​making the automatic exchange of tax information an international standard. Obviously, countries that pride themselves on caring about individual freedom will have problems with this standard. Especially the U.S., since I do not understand how they will be able to meet this standard without violating their constitutional norms, situation that also happens in Panama.

 So if they say ‘do as I say and not as I do’, the only logical explanation for their behavior is to avoid commercial competition. This explanation is, besides, supported by empirical reality. Just read the OECD’s original document that gives rise to this initiative, ‘Harmful Tax Competition’, published in 1998 and available on the web.

Added to this are the measures that supposedly could be taken against countries like Panama, all of which are in violation of International Trade Law, and standards. In other words, under the tax excuse, they are acting in violation of International Law, without their supposed standards being part of a Public International Law norm.

For this reason, Panama should move the debate to the correct forum: trade. This debate should be in the hands of the Ministry of Trade and Industry and not the Ministry of Economy and Finance. In the fiscal logic, the country loses. In Public International Trade Law, the country wins. It’s as simple as it is difficult: difficult, because it requires strength and determination, simple, because the Law is on our side.