Colombia declares Panama a tax haven, seeking to recoup lost revenue
BOGOTA (Reuters) - Colombia on Wednesday declared Panama a tax haven for individuals and businesses as the government looks to curb tax evasion and seeks to pressure the Central American country to sign a financial information-sharing agreement.
The move could push Colombian investors and businesses to pull out of Panama, since assets stored in declared havens are taxed at three times the rate of foreign assets in countries that share data with Colombia.
The decision may motivate Panama to sign an accord rather than risk losing investments.
Under the declaration, Colombian assets in Panama will be taxed at a rate of 33 percent, instead of the previous 10 percent rate, the country's tax authority said. If Panama signs the accord, Colombians will go back to paying the 10 percent.
Colombia's Congress, dominated by a coalition that backs President Juan Manuel Santos, is likely to approve a package of tax reforms aimed at raising an additional $26 billion in revenue and recovering $10 billion lost to tax evasion during the next four years.
The reform would introduce prison sentences for tax evaders for the first time. Any citizen who fails to declare foreign assets worth more than 8 billion pesos ($3.9 million) could face four years in jail.
Colombian investments in Panama more than quadrupled last year to $3.2 billion, and represented 41.8 percent of total foreign investments by Colombians in 2013, according to central bank figures.
The Colombian government stands ready to negotiate an agreement, Finance Minister Mauricio Cardenas said in a statement.
"We will continue to make necessary efforts to find a solution that is satisfactory for both countries," he added. Continued...