Panama faces a long road ahead to meeting international tax transparency standards, despite leaving the "gray list" of tax havens, the Organization for Economic Cooperation and Development (OECD) said.
In July, Panama officially exited OECD's list of tax secrecy jurisdictions after signing its 12th bilateral information exchange agreement, precisely the number needed to become whitewashed.
"The fact is that they now have 12 agreements, which is fine. That's good. But the real story is not about that. The real story is about complying with the standard," the head of OECD's Global Forum on tax transparency, Pascal Saint-Amans, told BNamericas.
Saint-Amans added that Panama now has to show that it is ready for the second phase of Global Forum's peer review process, which will look at the practical implementation of transparency measures.
The first phase of the peer review, looking at Panama's tax regulation framework, found serious deficiencies in late 2010. "Therefore the report concluded that they couldn't move to phase two. This means you are so bad, that's it's not even worth looking how you do it in practice," Saint-Amans said.
Panama has made significant progress since beginning its efforts to get off the "gray list" in 2009, the official said. These steps include improvements in the transparency of company ownership data and giving more teeth to tax authorities. But OECD still has question marks over many issues, including the apparent lack of progress on improving weak accounting standards.
"Is the progress [so far] good enough to move them to phase two? I don't know yet," Saint-Amans said. "This will be assessed when they ask for the supplementary report, which should come quite soon."
Analysts and government officials have said the exit from the "gray list" will aid Panama's efforts to become a regional financial hub, by giving the country a cleaner image abroad. Also, some international banks have adopted the policy of not operating in countries on the gray list, which became an obstacle for attracting such banks to Panama.
MEASURING DATA EXCHANGE
In the medium term, OECD plans to monitor the amount of information that is actually exchanged under the bilateral treaties signed by Panama and other countries.
Saint-Amans said there is an inescapable time lag between when the treaties are signed and when information on requests and responses becomes available. The agreements first need to be ratified by each country's parliament, and a year must then pass before the first information request can be lodged.
"But that's something we will be assessing. Because at the end of the day, that's the only real test - whether the tax information actually gets exchanged," he noted.