| Asset Havens |
| Panama:
Still the World’s Most Useful Asset Haven |
| By Robert Bauman |
| Panama continues
as one of the world’s best tax and asset protection havens, and it also
offers several options for tax-advantaged residency.
That’s a considered
opinion The Sovereign Society has espoused for several years, based on
hard facts about this strategically located central American isthmus, the
so called “Land Between the Seas,” best known for its famous canal.
As a member
of the U.S. Congress in the 1970s, I visited Panama several times. I did
not return until 1999 and have been back many times since. The 30-year
transition was truly amazing. |
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| From a sleepy
American colonial town, Panama City has blossomed into a major urban center
with a skyline dotted with huge hotels, international banks and countless
condominiums. Urban, rural and ocean front real estate investment opportunities
abound and retirement possibilities are everywhere. Panama enjoys an impressive
financial infrastructure with over 80 banks, including many local branches
of global banks such as HSBC, Barclays and Dresdener.
It also has
a stable, democratically elected government; established asset protection
laws dating back almost a century; legal entities
and offshore corporations
including trusts, international business corporations (IBCs) and family foundations; tax free investment
for foreigners—all protected by statutory financial privacy and banking
secrecy. And it also offers an attractive pensionado residency plan for
foreigners seeking to retire in a tropical climate where living is easy
and costs are low. Most appealing, Panama stands up for its sovereignty.
Notwithstanding the 1989 U.S. invasion to oust dictator Manuel Noriega,
Panama does not accept dictates from the United States. Nor is it under
colonial control from London, as are the British overseas territories,
once known as reliable offshore havens. |
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| In addition,
the highly independent Panamanian government, regardless of the party in
power, has consistently rebuffed the demands of the Organization for Economic
and Community Development (OECD) and other global busybodies. From the
outset of the OECD’s shameful “harmful tax competition” initiative, Panama
has made it clear that it will not abolish bank secrecy and begin exchanging
information about those who use its financial services with tax authorities
in other nations until every other nation agrees to do the same. This “level
playing field” scenario is highly unlikely to come to pass, particularly
since the world’s largest tax haven, the United States, refuses to abide
by it.
A New Regime;
An Old Name
In early May,
Panamanians went to the polls in the first national election since 1999. |
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Offshore
Resources Gallery
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| The clear
victor was Martin Torrijos, the son of the late dictator, Omar Torrijos,
who seized power in 1968 and ruled until his death in a mysterious plane
crash in 1981.
Although the
younger Torrijos ran in the last presidential election, disenchantment
with the president, Myra Moscoso, gave him fresh appeal this time and he
won a three-way race with 50% of the votes.
Many Panamanians
fondly remember the new president’s father, Omar, as a benign dictator
who promoted land reform, opened up universities to blacks and defended
the rights of the indigenous Indian and Creole populations against the
white elite oligarchy.
The elder Torrijos
is also revered for standing up to the United States and, in 1979, securing
control of the Panama Canal, the maintenance and operation of which remains
central to the success of the nation’s economy.
The son admires
the memory of his father, but has made clear he wants no return to dictatorship. |
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| His policy
statements are pro-business and free market in specifics and tone. A Torrijos
victory “should mean a considerable improvement in the outlook for policy
in Panama, and a generally more pro business stance by the government,”
Wall Street brokerage Morgan Stanley said before the election. Torrijos
recognizes the highly important part offshore finance and banking plays
in the national economy.
No Tax Information
Exchange Agreement
One of the
first orders of business for the new president is negotiating a free trade
agreement with the United States. Talks with Washington are scheduled to
conclude this month. No doubt, there will be more pressure from the United
States to negotiate a tax information exchange agreement (TIEA), which
might permit IRS fishing expeditions into Panamanian banks and trust companies. |
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Offshore
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| Although Panama
has a mutual legal assistance treaty (MLAT) with the United States that
provides for exchange of information in criminal matters, it has shown
no interest in agreeing to a TIEA, even as many British “tax havens,” such
as Bermuda, the Cayman Islands and the British Virgin Islands, have done
so under orders from London.
The incoming
president must also decide whether to proceed with a multi-billion-dollar
expansion of the Panama Canal, which Torrijos says will be Panama’s “most
important decision of the century.”
Constructed
by the United States and opened in 1914, the canal is in grave need of
widening to accommodate larger ships, including supertankers. Revenue from
canal operations in 2003 was US$900 million, and the costs of renovation
are estimated to be US$4-$6 billion.Financing this project will be a daunting
challenge, but the expansion will also require the government to purchase
vast tracts of land, much of it occupied by impoverished farmers. Before
it can begin, Torrijos must obtain approval for the project in a national
referendum.
A Bright
Future
After sluggish
growth in recent years, Panama’s economy should grow at a brisk rate of
about 6% in 2004, thanks to growing U.S. demand for its exports, plus a
boom in construction fueled by real estate tax breaks that Torrijos plans
to extend.
I believe this
growth will continue, aided in large part by Panama’s unique history and
relationship with the United States. While the United States has for years
tried to strong-arm Panama into repealing its attractive offshore laws,
they are tolerated because they undeniably insure Panamanian stability.
And Washington needs a stable and prosperous Panama to safeguard its strategic
interest in the Panama Canal.
For those who
choose Panama as a retirement residence or their base for asset protection,
estate planning and offshore business, these realities, as well as the
recent election results, should provide continued confidence in the future.
Contacts
In Panama
Trust Services
SA. Panama, Republic of Panama. Tel.: +(507) 269-2438 or +(507) 263-5252.
Fax: +(507) 269-4922 or +(507) 269 9138. E-mail: fiduciary@trustserv.com.
Link: http://www.trustserv.com
or www.trustservices.net. Licensed
in Panama since 1981, this firm specializes in offshore corporations and
trust formation and administration. Derek R. Sambrook is the managing director.
Rainelda Mata-Kelly,
Panama, Republic of Panama.
Tel.: +(507)263-4305.
Fax: +(507)264-2868. E-mail: rmk@mata-kelly.com.
Link: http://www.mata-kelly.com.
Ms. Mata-Kelly specializes in Panamanian administrative, commercial and
maritime law and assists clients with immigration, real estate, contracts,
incorporation and other legal issues.
Greg Geurin,
Panama, Republic of Panama. Tel.: +(507)264-2204. E-mail:
panama@internationalliving.com. Mr. Guerin directs the operations of
International Living in Panama and has excellent contacts in the Panamanian
legal and real estate communities.
(Join Bob Bauman
and more than 20 other distinguished speakers at The Sovereign Society’s
Offshore Opportunities Seminar in Panama City, October 20-23, 2004. For
more information, e-mail Grant Perry at gperry@agora-inc.com
or call toll-free, 1 (866) 381-8446 or +1 (410) 783-8446.) |
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| Robert
Bauman is Legal Counsel for The Sovereign Society. He is a former member
of the U.S. House of Representatives from Maryland. He is a graduate of
the Georgetown University Law Center (1964) and the School of Foreign Service
(1959). He is the editor of The Sovereign Society Offshore A-Letter, our
free e-mail newsletter. |
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Article
Index ~ Panama
Index ~ |
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