Tax Fraud in Panama
Tax fraud was long believed to be a crime with no sanctions in Panama. This was because Panamanian law considered tax evasion as an administrative fault that resulted in a fine but not in liberty deprivation.
The lack of severe penalties for tax evasion placed Panama in the international spotlight as a tax haven. For this reason, the government has taken significant steps to create specific measures and regulations that discourage tax fraud.
The Economic Commission for Latin America (ECLAC) estimated that tax evasion in Panama during 2015 was USD 340 billion. This estimate includes only legal activities. However, illicit activities also produce income that is subject to tax evasion.
For this reason, law 70 was approved in January 2019, which updates the Panamanian tax system and establishes tax evasion as a precedent for money laundering.
About the legislation
Law 70 sanctions any individual, company, or a third party, who alters values, assets and other financial resources, in full or partial knowledge, against the Panamanian National Treasury. These actions will be sanctioned with a penalty of two to four years of prison and fines of one to three times the tax fraud amount.
Furthermore, if it is determined that the offense was committed through one or more persons or entities, the penalty will be imposed on all legal entities in question and will carry a fine of one to three times the tax fraud amount.
This penalty is applicable when the tax fraud amount is equal to or greater than USD 300,000 in a fiscal period. When the tax fraud amount is less than USD 300,000, it will be sanctioned by the DGI (Direccion General de Ingresos).
This project, introduced by the Ministry of Economy and Finance (MEF), has no impact on the majority of the Panamanian population since less than 100 local taxpayers could meet the threshold of USD 300,00 or more in tax evasion.
Platforms for complaints
Panama has worked in different ways to promote fiscal transparency and recover a positive image. The government is also working along with the NPO Crime Stoppers to make available the anonymous complaints platform Tu Pista. This platform already works in other countries in the Central-American region and allows users to attach photographs, audios, videos, and documents to justify a complaint.
Ultimately, citizens and authorities must join efforts, whether using technology or not, to keep a robust and proactive position against tax evasion.
Panamanian law carries severe consequences before the crime of tax evasion. To avoid problems, you and/or your company should NEVER:
- Use false documentation.
- Neglect issuing legal invoices for economic activities.
- Communicate false data to obtain refunds or ignore payments to the corresponding tax authority.
- Ignore keeping the mandatory accounting records or posting false data in such systems or records.
- Declare non-existent fiscal losses.
Contact us if you need more information about Tax Fraud and law 70.