In the world we live in, what is legal is not always moral, and what is moral is not always legal. The revelations that we are just beginning to know of the 11.9 million documents analyzed by hundreds of journalists from the International Consortium of Investigative Journalists (ICIJ) once again confront international public opinion with the reality of duplicates. tax standards of today’s society.
As the revelations progress, each citizen must understand what are the elements of judgment to weigh journalistic discoveries. Here I’m going to highlight the most obvious and obvious legal details that – while annoying – are key to unraveling Panama’s role in all of this.
The power of information
ICIJ journalists do not steal information, they do not hack computer systems, let alone pay for information. The ICIJ is not hiding them from Panama and these revelations are not campaigns by the Organization for Economic Co-operation and Development or George Soros, let alone Movin. This information is the result of years of work and analysis.
Having corporations, trusts, private foundations, insurance and reinsurance companies (as in the case of Bermuda) is not a crime. To the chagrin of ordinary citizens, wealthy people and companies of a certain size use all these legal structures for a single purpose: to optimize financial and asset management.
Public limited companies in all their forms, including public limited companies, have enabled the development of modern capitalism, since they limit the risk that investors or owners of this company will lose their personal or family assets because the said company limits how far they can be responsible, that is to say to the maximum of the capital of the company.
Businesses and their other relatives also serve a laudable purpose of protecting the assets of people in difficult situations, such as an opposition businessman in Nicaragua or Venezuela. The obverse of this coin is that corporations can also be used to hide assets from treasury, business partners, ex-wife, or worse yet, launder bribes, channel bribes. -wine or hide ill-gotten goods.
Modification of the obligations of Panamanian lawyers
Law 32 of 1927 established the regime of public limited companies in Panama. Throughout the 20th century, the business grew slowly until the emergence of the International Banking Center, which made it possible to combine encrypted bank accounts with limited companies with bearer shares. At that time, in the roaring 1970s, the resident agents, that is, the attorneys or law firms that made up the company and maintained its register, did not have a greater responsibility for what was did or had happened with the company. anonimous society.
These Panamanian legal persons were so attractive that large financial intermediaries, the United States and Western Europe, bought them in volume to offer them to their clients. That way, the Panamanian lawyer had no idea who the ultimate beneficiary of the business was, whether he was in Alaska, Antofagasta, Australia, or the house next door.
The sad truth is that very early in its Republican history, Panama decided that its tax system was territorial in nature, that is, only rents or income generated by economic activities on Panamanian territory are subject payment of taxes.
With the proliferation of free zones and special tax regimes, this has ended up being a half-truth. On the other hand, the vast majority of Western countries follow another rule, that of universality. If a citizen or permanent resident of a country with a universal tax system generates income outside the country, they must pay taxes. Hence the beauty of the Panamanian system: very reserved societies, a territorial tax regime, a flexible financial center, and authorities indifferent or too weak to pose a threat.
The path of change
In the early 1990s, the Mutual Legal Assistance Treaty was signed between Panama and the United States. It was the first break in the strength of Panamanian companies and crypto accounts. Subsequently, the first substantive transformation occurred with Law 2 of 2011, which required resident agents to exercise “due diligence” on their clients. Law 23 of 2015 dealt a huge blow to law firms, establishing the obligation to report transactions of all their legal instruments (companies, trusts and foundations of private interest), in turn, the head of Compliance was created to monitor that the obligations established by these laws are actually carried out.
On the other hand, Law 129 of 2020 put in place a system allowing law firms to inform the authorities, for very specific purposes, of the real identity of the beneficiaries of the legal persons they represent. This standard complements the biggest transformation of the Panamanian tax system in republican life in this country: Law 70 of 2019 established tax evasion of $ 300,000 or more in one fiscal year as a Code offense. criminal law and it was also considered a pre-money laundering crime.
With these laws and dates, one can then assess whether the information from the ICIJ regarding Panamanian lawyers indicates the possible commission of a crime, or another liveliness of the capitalist system.
Panama has not fulfilled some of its tasks in financial transparency, documentation of final beneficiaries and, of course, justice. This, which the international organizations and most of the developed countries reproach us with, is the great cause of the disastrous lists and also of a great deal of opacity in the Panamanian economy itself and in public procurement.
Very controversial revelations are sure to arrive in the coming days. The right option for Panamanians is to turn a crisis into a great opportunity and decide whether it is worth all the economic and reputational damage the country faces to continue to maintain part of the financial legal services industry, which is becoming a threat. permed. the rest of the financial sector and the national economy as a whole.
In the 1950s, General Motors President Charles Wilson coined the phrase, “What’s good for General Motors is good for America.” There are those who think that what is good for the opacity and the lack of transparency of corporations, private foundations and trusts is good for Panama. In neither case is this true. – Rodrigo Noriega, LA PRENSA