Panama announced on Tuesday that Colombia has one week to remove Panama´s tax haven status, or it will be included in a list of countries which will face economic sanctions.
Panama Foreign Minister and Vice President Isabel de Saint Malo announced the deadline after a meeting of the council of Ministers on Tuesday, and stated her desire for Colombia to remove the tax haven status so that the two countries could debate matters on equal terms.
Tensions flared earlier this month when Colombia declared Panama a tax haven, over the Central American country’s failure to meet a deadline to sign a bilateral tax information exchange agreement.
MORE: Colombia and Panama look to settle tax haven agreement
Saint Malo announced that she will meet with her Colombian counterpart Maria Angela Holguin in Panama City this week and that Trade Minister of Panama Meliton Arrocha will meet with Minister of Commerce Cecilia Alvarez in a bid to end the dispute amicably.
If no agreement is made, and Panama remains labelled a tax haven, Panama authorities warn that Colombia will be added to a list of countries deemed to be discriminatory against Panama.
Saint Malo de Alvarado said “it is not in Panama’s interest to harm Colombia, however, finding no solution to this issue , we will have to resort to defensive measures.”
Countries on the blacklist will face sanctions such as the imposition of visas and charging the ships passing through the Panama Canal.
Panama is the largest foreign investor in Colombia after the United States, and has been Latin America’s fastest growing economy since 2008, growing at an average of 8% per year.
The Colombian government will be keen to continue friendly relations with the country.
Panama and Colombia have historically had warm relations and the Central American country and about 500,000 Colombians are registered as living there.
Panama has a flourishing financial centre and is also home to many international corporations whose owners and high ranking executives are Colombian nationals. Exact figures on how much money Colombians might be keeping in Panama are unknown but estimates range between $2 billion and $7 billion for all tax havens.
According to Caracol Radio, the Colombian government decreed on Wednesday morning that Panama’ status as a tax haven would be postponed until January 1 2015, thus giving breathing space for the two countries to come to a conclusion without damaging sanctions being imposed.
Sources
- Panama da a Colombia 7 días para exclusion de lista de paraísos fiscales (Caracol Radio)
- Colombia aplazara vigencia de declaratoria de paraiso fiscal a Panama (Caracol Radio)
- Warm no more (The Economist)