TIEA’s And WikiLeaks–What’s Going On In Panama?
Panama is much discussed on the international stage these days, but, for a change, the news right now is not all good.
First, on Nov. 30 last year, Panama signed a tax information exchange agreement (TIEA) with the United States, ending, for all intents and purposes, this country’s tradition of bank secrecy. Even today, more than a month later, bankers and others in Panama are not certain how the terms of the treaty will be interpreted or applied, but, bottom line, an American should take for granted now that, if he has a bank account in Panama, the U.S. government will know about it.
Does this mean that Panama is no longer the appealing offshore haven we’ve been reporting it to be for years?
This new TIEA treaty (signed by Panama’s President Martinelli, we understand, because U.S. President Obama promised he’d support the U.S.-Panama free-trade agreement Martinelli has been pushing for) means Panama is no longer a jurisdiction offering bank secrecy. That’s it.
It doesn’t mean that Panama is no longer the world’s top retirement haven (it is). It doesn’t mean that Panama is no longer the best place in the world to launch and to run an international business (it is). It doesn’t mean that Panama is no longer one of the best places on earth right now to invest in beachfront and productive land (it is).
Panama remains everything we’ve been telling you it is…with one (maybe to you important) change: It’s no longer a place to open what you hope to be a secret bank account.
I hate to be the one to break the news to you, but the days of secret bank accounts are numbered. Bank secrecy is dead in Switzerland, formerly the world’s premier bank secrecy haven. It’s now dead in Panama, one of the final hold-outs to U.S. and other international pressures to abandon its tradition of privacy. I predict that other jurisdictions still preserving bank secrecy will cry Uncle, too, in time, as Uncle Sam and the OECD, among others, continue to push their way into peoples’ business.
If you’re an international drug dealer or involved in some other illicit activity and have been parking illegally gotten gains in offshore bank accounts, you’ve probably got a problem.
If you’re an average American choosing to keep some (or even all) your money in offshore banks, in practical terms, this change of situation in Panama doesn’t have to be a big deal. Right now, in the wake of the new treaty, Uncle Sam can find out about your offshore account in Panama by making inquiry in Panama. But, the truth is, you were meant to have told Uncle Sam about your offshore account in Panama yourself. Every American is required, by U.S. law, to report any offshore bank account (or accounts) with more than US$10,000 in it as part of his annual IRS tax filing.
In other words, if you’ve been complying with U.S. law, you’ve been reporting any offshore accounts that you were meant to be reporting all along. Meaning the new TIEA doesn’t really mean much for you.
Then, while the dust was still swirling thick in the wake of this unfortunate turn of events, Panama’s President Martinelli was again in the news, this time as part of the ongoing WikiLeaks debacles. WikiLeaks has made public cables between Marinelli and members of the U.S. DEA that have Martinelli asking for help with wire taps to bug his political enemies and others within Panama. Martinelli is claiming the cables are being misinterpreted, while the political opposition in Panama is making great hay, saying Martinelli has been outed as the bully he is.
I won’t try to interpret all this. You can think for yourself. Certainly, it’s an embarrassing situation for the otherwise hugely popular Martinelli to find himself in at the start of this new year.
What does it mean for you, the would-be investor, retiree, or entrepreneur in Panama?
Again, I’d say very little. We take no political sides here at Live and Invest Overseas, and, ordinarily, we don’t report political happenings.
First, that’s not our beat. Second, ordinarily, local political happenings have little or no effect on foreign residents, retirees, or investors. We watch now, from front-row, in-country seats, as local politics play out before us here in Panama…as we watched in Ireland years ago and then in Paris. But we try to stay focused on the point.
Martinelli is taking a beating for having said and requested things he shouldn’t have. Politicians often do. Again, that’s not our beat.
Our beat is not intrigue, strife, trouble, or drama. Our beat is opportunity.
And, as we stand today on the threshold of 2011, I look around little Panama, and I see, still, tremendous opportunity.
This remains a country on the fast track. A country open for business. A country pushing ahead toward First World status.
No, you can no longer open a “secret” bank account here. And, yes, Martinelli has taken a big misstep.
On the other hand, Panama’s Pacific coastline is as dramatically beautiful as ever, and the sun is shining, still, warm and bright, above it. The cost of living in this country can be wonderfully low, the tax advantages significant, the way of life comfortable and full of the unexpected.
Lief and I have spent the past three weeks traveling in the United States, enjoying the holiday season with family and old friends, who have asked, often, what is your plan? How much longer do you intend to be based in Panama?
Indefinitely is our reply. We could be anywhere in the world at this point in our lives, and, long term, our plan is to divide our time among several destinations we most enjoy, including Paris, Istria, Buenos Aires, and, yes, Panama.
Two-and-a-half years ago, we chose to move from Paris to Panama City because we knew that, while France is no place to start a business, Panama is as good as it gets for the international entrepreneur.
It’s also a great place to raise a family and an interesting, never-dull, bubbling-over-with-opportunity place to be at the start of this 21st century.
As far as we can tell, none of that has changed. We remain happily at home here.