“A tax haven . . . has one of three characteristics: It has no income tax or a very low-rate income tax; it has bank secrecy laws; and it has a history of noncooperation with other countries on exchanging information about tax matters,” said Rebecca Wilkins, senior counsel with Citizens for Tax Justice, a nonpartisan nonprofit dedicated to improving U.S. tax policy. “Panama has all three of those. … They’re probably the worst.”
The trade agreement with Panama would effectively bar the U.S. from cracking down on this activity. The U.S. would not be allowed to treat Panamanian financial services transactions differently from transactions in nations that are not tax havens. It would also be unable to pursue some standard anti-money laundering techniques in Panama. Combating tax haven abuse in Panama would be a violation of the trade agreement, exposing the U.S. to fines from international authorities.
“It directly undermines Obama’s putative domestic agenda of job creation, cracking down on tax havens and collecting revenue from tax-dodging corporations,” said Lori Wallach, Director of Public Citizen’s Global Trade Watch. “The [free trade agreement] would forbid future use of existing policy tools to combat financial crime.”