Q&A on Panama Papers
What does the release of the “Panama Papers” actually tell us?
The Panama Papers describe in detail how a veil of secrecy is still allowing funds to be transferred between jurisdictions and held offshore, where it can be hidden from tax authorities. Panama’s consistent failure to fully adhere to and comply with international standards monitored by the Global Forum on Transparency and Exchange of Information for Tax Purposes is facilitating the use of offshore financial centres for hiding funds, depriving governments of tax revenue and often aiding and abetting criminal behaviour.
The Panamanian government says that the OECD has recognised its efforts to improve access to information about beneficial ownership of entities and its willingness to share such information with authorities in other jurisdictions. Is this actually true?
The OECD has been working for more than seven years to establish robust international standards on tax transparency and ensure their implementation. In 2009, when the initial objective of the Global Forum was to reach international agreement on the Exchange of Information on request, most countries and jurisdictions were quick to get on board, while a few, including Panama, were reluctant to make commitments or move forward along with the rest of the international community. After many years of resistance, Panama updated its domestic legislation in 2015, which provided the basis upon which to engage in the phase of the review process that assesses whether effective information exchange is actually taking place. Panama remains well behind most other comparable international financial centres.
To push the transparency agenda forward, the G20 identified Automatic Exchange of Information as a new international standard in 2014, and almost 100 jurisdictions and countries have already agreed to implement it within the next two years. Whilst almost all international financial centres including Bermuda, the Cayman Islands, Hong Kong, Jersey, Singapore, and Switzerland have agreed to do so, Panama has so far refused to make the same commitment. As part of its ongoing fight against opacity in the financial sector, the OECD will continue monitoring Panama’s commitment to and application of international standards, and continue reporting to the international community on the issue.
Is Panama the only outlier, or is it the tip of the iceberg? Are there other jurisdictions posing similar problems
Having conducted well over 200 Phase 1 and 2 peer reviews in the past 7 years, the Global Forum has identified a number of member countries and jurisdictions whose legal and regulatory framework for the exchange of information are as yet not up to international standards. They include Guatemala, Kazakhstan, Lebanon, Liberia, Micronesia, Nauru, Trinidad and Tobago and Vanuatu. It is clear that there are other jurisdictions where a lack of information on beneficial ownership of corporate and other entities is facilitating illicit flows.