By Mike Godfrey, Tax-News.com, Washington - Panama’s Deputy Economy Minister, Frank De Lima has said that by the beginning of 2011 Panama should be placed on the Organization for Economic Cooperation and Development’s (OECD's) white list of territories that have substantially implemented the internationally agreed standard for transparency and tax information exchange through the signing of comprehensive Double Tax Agreements (DTAs). He said negotiations with South Korea for a convention for the avoidance of double taxation had commenced on August 13 and negotiations with Singapore are to begin this week. The conclusion of these two agreements, De Lima said, would bring Panama’s tally of such OECD model agreements to twelve, satisfying the criteria for white list placement. According to De Lima, to date Panama has agreed the text of double taxation treaties with France, Italy, Belgium, Spain, Luxembourg, the Netherlands, Qatar, Portugal, Mexico and Barbados, but has only signed the latter two. Panama is also in negotiations for similar agreements with Ireland, the Czech Republic, Canada, Bulgaria, Hungary, Britain, Cyprus, Germany and Switzerland. In September, Panama will conclude talks on a text with Ireland, and in October with the Czech Republic, De Lima disclosed. Also in October, Panama’s Vice President and Foreign Minister, Juan Carlos Varela is to undertake an official tour of Europe, signing treaties with Italy, Spain, France, Portugal and Luxembourg.   

Actor Wesley Snipes was sentenced to 36 months in prison for tax evasion. According to the Perez Hilton website, the movie actor had appealed the judge's decision imposed in 2008, arguing the sentence was unreasonable. But last Friday a federal appeals court in Atlanta, Georgia denied Snipes' appeal. Two years ago Snipes, 47, was convicted of not filing tax returns from 1999 to 2001 and not paying the government more than $12 million dollars. His lawyers did not clearly say whether or not they would appeal again. Snipes' legal problems, one of the most important African-American stars of Hollywood, have hurt his career in recent years. (Panama America)

Editor's Comment: That's funny. The Panama America picked up this story from the news wires in the United States, but they apparently either didn't know or forgot that Wesley Snipes was taking advice from a former member of the community of English speaking expatriates in Panama - Eddie Ray Khan. Snipes was listening to and taking advice from Khan on why he should not be paying taxes to the federal government in the United States. Eddie Ray Khan has been convicted of all kinds of crimes and has charges pending against him for more, and in fact he will most likely never be released from prison. Snipes took bad advice from Eddie Ray Khan which resulted in this conviction and a three year prison sentence. Eddie Ray Khan was eventually arrested in Panama and flown back to the United States to face similar charges. The Panama America completely missed the Panama angle to this story.   

Anexo 94 - Did you take a deduction on your active business SA’s Panama Declaración de Renta on either line 29 or 56? If so, read this it is important. It will be especially important to comply with the new changes should you ever need to obtain a Paz y Salvo for your SA. Be sure to check with your SA’s legal representative or tax professional to know if these new filing requirements are being met. Among the various items that the new administration in Panamá has done with annual income taxes, is change the filing requirements – sometimes after the fact. For example, Law 8 of 2010 which most people are aware reduced the individual and corporate tax rates was placed in the Gazetta and became the law of the land on 15 March 2010. Corporation (SAs) tax returns for 2009 were due on 31 March and many had already filed the returns prior to 15 March. Individual returns were due 15 March. MIFI’s tax collector, Dirección General de Ingresos (commonly abbreviated DGi), has amended the electronic forms to prepare and file the 2009 returns five times since January. And they have added a completely new form called Anexo 94. DGi wants the details of the deductions taken on lines 29 or 56 of an SA tax return for 2009 and similar lines (29 & 54) on personal returns already filed. (more)

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By Ivan Castano - Mexico's Grupo Bimbo will seek bolt-on acquisitions in the 17 countries where it is present, a company official has confirmed to just-food. "We are working to pay as much as US$700m in debt by the end of the year so we will have the cash to look at deals," he said. "We are primarily looking for complementary acquisitions in the markets where we are already present." The official would not detail in which markets Bimbo is more keen to bolster its presence but analysts have said the firm is keen to grow in the US and Latin America as it already has a monopoly in Mexico. The official, however, said Bimbo has no immediate plans to enter or make big investments in new markets.

Despite its expansion plans, the company is fending off criticism and lawsuits in Mexico and across Latin America for its wheat-bread labelling practices, which consumer groups claim are deceiving consumers. Bimbo, which claims no wrong-doing, continues to appeal fines in Peru and Panama. The official insisted the appeals were "going well" and that the firm expects a resolution by the end of the year.   

By LEON HADAR - WASHINGTON CORRESPONDENT - FIRST, a few items of good news for the few remaining free-trade fans in Washington. US President Barack Obama and his aides do want to complete a free trade agreement (FTA) with South Korea, as well with Colombia and Panama, by November and to get the new Congress to approve them before the end of the year. The plan to move ahead with the US-South Korea FTA - a preliminary draft of the accord was reached with South Korea in 2007 - was announced during the recent Group of 20 Summit in Toronto, Canada, where Mr Obama met South Korean President Lee Myung Bak on the sidelines of the gathering. South Korea will host the next G-20 meeting in November after the outstanding issues over the pact are expected to be resolved. That the trade pact with South Korea, as well as the rest of the US trade agenda, has been languishing on Capitol Hill for the last three years reflect the difficult economic and political environment under which US officials and lawmakers have been operating in.

The financial crisis and the ensuing Great Recession have strengthened anti-globalisation sentiment among Americans. And the electoral victories of the Democrats in the November 2008 elections increased the power of a political party and its core constituencies, including unions that have traditionally been opposed to free trade principles while being the proponents of the more protectionist 'fair trade' agenda. That explains why Mr Obama was forced to place the proposed FTAs with South Korea, Colombia and Panama and the re-energising of the Doha global trade negotiating round on the backburner as his administration was pushing through politically controversial fiscal policies aimed at resolving the economic crisis and creating the foundations of an economic recovery.

What triggered the recent moves to get the US-South Korea FTA ratified after the coming mid-term elections have been signs of growing military threat from Kim Jong Il's North Korea, which required that Washington reassert its long-term military commitment to Seoul. Progress on the free trade pact with the South Korean should help highlight America's strong ties with that East Asian ally. Moreover, against the backdrop of the slow economic recovery, Mr Obama has stressed the need to increase US exports in general, and to the emerging economies of Asia in particular, as a way of advancing US global economic interests and creating new American jobs. Strengthening trade ties with dynamic economic powerhouse South Korea would fit into that ambitious scheme and could - in theory, that is - help mobilise public and congressional support for rejuvenating the rest of the global trade agenda. After all, approving the FTA with South Korea, America's seventh-largest trading partner, would help increase US exports there to about US$11 billion.

Ironically, one of the reasons that Mr Obama and his aides are hoping to get the FTA with South Korea, and perhaps other trade pacts, approved after November has to do with the expectations that the Democrats could lose seats in the Senate and the House of Representatives. The more pro-business Republicans could prove to become Mr Obama's most important political allies as he tries to promote new trade initiatives. Indeed, former Democratic President Bill Clinton's success in winning Congressional support for very aggressive global trade liberalisation policies - ratifying North American Free Trade Agreement (NAFTA), establishing the World Trade Organization (WTO) and inviting China to join it - was very much tied to the backing that he received from mostly pro-free trade Republican majorities in Congress that were able to counter the opposition from the more protectionist Democrats.

Now Mr Obama and his aides are hoping that the growing ranks of Republican lawmakers after November - an electoral outcome achieved thanks to an effective campaign by Tea-Party activists - will strengthen the White House's hands on the global trade front. In practical terms, the White House also recognises that Washington's failure to approve the trade pacts with South Korea and Panama has only played into the hands of America's economic competitors that have been able to win more access while US companies lost share in these two important markets.

But here is some of the not-so-good news: Even assuming that the new Congress would ratify an accord with South Korea - there are still problems involving US car and beef exports that need to be resolved. And it is not clear that Mr Obama will have the political support, or even the political will, to push forward on other important global trade issues, including the completion of the stalled Doha round of global trade talks. A weak economic recovery or a double-dip recession would certainly make it impossible for Mr Obama to make progress even on the pact with South Korea. The anti-free trade unions and the environmentalist groups remain part of a very powerful protectionist lobby inside the Democratic Party and Congress, a sentiment that continued to be shared by large number of economically distressed American voters.

This is the political reality that Mr Obama will have to take into consideration if he decides to run for another presidential term. To put it in simple terms, supporting free trade is not a formula to win election.

And while no one would describe Mr Obama as a protectionist, the conventional wisdom in Washington is that he is certainly not a free-trade enthusiast. While he would like to see an increase in US exports, Mr Obama is sceptical that Doha and other global trade liberalisation initiatives are going to benefit US economic interests. This is why it is unlikely that Mr Obama's Washington will become a cheerleader for global free trade anytime soon.   

WASHINGTON, July 6 (Reuters) - President Barack Obama wants to win congressional approval of free trade deals with Panama and Colombia but has not set a deadline for resolving problems with the pacts, the top U.S. trade official said on Tuesday. "These free trade agreements are almost entirely to the benefit of American exporters and do represent collectively several billion dollars of opportunities," U.S. Trade Representative Ron Kirk told reporters after a meeting of Obama's Export Promotion Cabinet. "We're going to do everything we can to bring them forward as soon as it makes sense to do so," Kirk said. But there is no specific timetable for resolving labor and other concerns with the agreements and sending them to Congress for a vote, Kirk said. "Hopefully we can come up with a more definitive timeline on those in the near future as well," Kirk said.

Last month at the Group of 20 summit in Toronto, President Barack Obama said he wanted to fix problems blocking approval of a free trade agreement with South Korea by November, when Seoul will host the next G20 summit. Obama also said he planned to send the Korea agreement to Congress for a vote by early 2011. Kirk explained that last month's meeting in Toronto was a good time for Obama to announce a deadline for the South Korea agreement because "you had the practical circumstance of the president being at the G-20 meeting with South Korean President Lee (Myung-bak) and his pending visit in November, his state visit as well as the G-20 visit."

"As you know, we've always said that the substance of our work with Panama and Colombia would drive those," Kirk added. Obama's decision to try to resolve beef and auto trade issues blocking the Korea agreement has split Democrats ahead of November congressional elections. While some like House of Representatives Majority Leader Steny Hoyer have welcomed the move, others like Ohio Senator Sherrod Brown have called it a mistake. All three agreements were negotiated by former President George W. Bush's administration and having been sitting on Obama's desk since he took office in January 2009.

U.S. farm and business groups say the Canadian parliament's recent ratification of a free trade pact with Colombia makes it urgent the United States act soon. The Canada-Colombia free trade agreement "means that U.S. wheat producers could lose sales worth $70 million today to Canada at a time when they can least afford it," the heads of the U.S. Wheat Associates and the Natonal Association of Wheat Growers said in a joint statement.

Democratic opponents have been pushing Colombia to do more to reduce killings of trade unionists and prosecute those responsible for thousands of murders. They also want changes to Panama's labor and bank secrecy laws and other reforms.

Editor's Comment: This FTA was first killed by the election of Pedro Miguel Gonzalez, a fugitive from justice in the United States who is wanted as a terrorist in the assassination of US Army Sergeant Zak Hernandez, as the President of the National Assembly on 1 September 2007. At that point the FTA had just recently been signed by both sides and quickly ratified by the Panamanian National Assembly. It's acceptance by the US Senate was supposed to be practically a done deal as well. But when Pedro Miguel Gonzalez was elected in Panama the FTA hit a brick wall. There was no way in hell lawmakers in the United States were going to approve anything after that slap in the face. Then shortly thereafter the political season heated up with the November 2008 election, and partisan politics further stalled approval in the US. Democratic lawmakers didn't want to approve anything negotiated and signed by the Bush administration. And now Obama is trying to do something (anything) to stem the bleeding while facing the midterm elections in November. He could just wait until after the elections and watch as the new Republican senate approves the FTA in relative light speed. In any case, the prospects for the FTA seem to be ticking up again, slightly. And by the way, Panama isn't going to change a word - either the US approves it as it's written, or forget it.   

The signing of a double taxation agreement with Italy has been postponed until September, said Panamanian Deputy Economy Minister Frank De Lima. Italian Prime Minister Silvio Berlusconi was due to sign the agreement on his visit to Panama this week. However, plans were postponed after the agenda became more complicated and time restricted, explained De Lima. Signing the agreement could have helped Panama move one step closer to moving off the grey list of tax havens drawn up by the OECD. Panama hopes that the treaty can be concluded in September when Vice President Juan Carlos Varela plans to travel to Europe. Varela should also be able to sign treaties with Spain and France during the same visit. The country has to sign five more DTAs before it can reach the 12 required to be removed from the grey list. (www.taxtreatiesanalysis.com)   

By DON WINNER for Panama-Guide.com - In the Republic of Panama the "ITBMS" tax was raised from 5% to 7%, effective 1 July 2010. This tax, known as the " Impuesto a las Transferencias de Bienes Corporales Muebles y la Prestación de Servicios" (ITBMS) (Tax on the Transfer of Movable Goods and Services) applies to some things and not others. For example if you buy a new Rolex, you have to pay the tax. However, most basic food items are exempt from paying the ITBMS. The government of Panama uses this to try to selectively tax some purchases and not others - things that are more "want" than "need." As soon as the new tax increase came into effect, street vendors who sell the prepaid cards for cellular phone service started charging their customers the new 7% ITBMS tax, and they also started trying to charge an additional 5% tax known as the "Impuesto Selectivo al Consumo" (ISC) (Selective Consumer Tax). I checked my cell phone bill, and the "ISC" is right there every month. However, now according to the MEF that's illegal and this tax is supposed to be "absorbed" by the company and not passed down to the consumers. Street vendors who sell the prepaid cell phone cards are supposed to charge the 7% ITMBS - so a $5.00 card should now cost $5.35 where before the tax increase they charged $5.25. The MEF has threatened that anyone trying to charge the additional 5% ISC tax to a consumer could face from two to ten years in prison. Anyway, this entire subject has been a topic of discussion over the past couple of days as people figure out how to deal with the tax increase.

Copyright 2010 by Don Winner for Panama-Guide.com. Go ahead and use whatever you like as long as you credit the source. Salud.   

By Alistair Holloway and Alaric Nightingale (Bloomberg) -- Commodity shipping costs measured by the Baltic Dry Index extended their longest losing streak in almost five years on a surplus of ships for hire. The index fell 55 points, or 2.3 percent, to 2,351 points, the lowest since Oct. 1, according to the Baltic Exchange in London. That’s the 25th consecutive drop, the longest losing streak since August 2005. Declines were led by daily rates for panamax ships, the largest to navigate the Panama Canal. They fell 4.4 percent to $21,147 a day. “We are at the moment finding ourselves with an over- tonnaged market,” Alex Gray, chief executive officer of Clarkson Securities Ltd., the freight-derivatives unit of the world’s largest shipbroker, said in an interview today. There’s “lower demand than we have seen at any stage this year.” The bulk-fleet’s carrying capacity will grow 16 percent this year, estimates from Clarkson Research Services show. Demand will increase by the equivalent of 634 vessels while supply will expand by 1,110 ships, it forecast. Imports of coal and iron ore by China, the world’s biggest user of the commodities, fell for two consecutive months, customs data show. Combined, the raw materials to make steel or generate power accounted for 54 percent of all dry-bulk goods carried at sea in the first quarter, according to estimates from Drewry Shipping Consultants in London. Daily rates for capesizes, the biggest vessels tracked by the index and typically iron-ore carriers, fell 1.8 percent today to $23,807.   

In Panama the ITBMS tax will be increased from 5% to 7% effective tomorrow, 1 July 2010, and Alberto Vallarino, the Minister of Economy and Finance, said this tax provides and will provide a "big universe of benefits." The implementation of this tax increase coincides with the date of the first year anniversary of the administration of Ricardo Martinelli. Vallarino said there have been many positive changes for Panamanians, and there are still many issues that need to be addressed. He added that during the second half of this year several government contracts will be let for projects the government is developing. About the tax, Vallarino said neither in Panama, nor anywhere else are people exempt from paying taxes, but that people should see the positive side such as the subsidy for cooking gas, electrical power, the "$100 for 70" program, university scholarships, and many more. (Telemetro)

Editor's Comment: There has been a little mini-boom of auto sales in Panama, as people try to scramble to make major purchases they already had planned before the new tax increase kicks in. On a $30,000 car the old 5% ITBMS tax is $1,500 dollars, which will be raising to 7% and therefore $2,100 - or $600 more. This tax increase was part of the reason why all three of the major ratings companies upgraded Panama to investment grade. International investors like to see countries implement fiscal changes that are responsible over the long term, increase revenues, manage and spend money responsibly, and to pay down or renegotiate foreign debt. Eventually Panama will be practically debt free - only borrowing money to finance large infrastructure projects. Government revenues continue to increase (thanks to things like this tax increase) giving them more resources to pay for an ambitious schedule of programmed government projects. As the economy continues to grow, new jobs are created, and more money keeps going into the hopper. This tax increase will have some, but not a devastating impact on the daily lives of most Panamanians. And of course, the screaming banshees will bitch about it forever, as expected.