Panamanian President Juan Carlos Varela said Monday in Tokyo it is unjust of the global community to attack his nation over the so-called Panama Papers, as it is in the process of negotiating tax information exchange agreements with other countries, including Japan, to enhance the transparency of its financial system.
Panama has been in the spotlight since the papers came to light earlier this month. A trove of 11.5 million leaked documents revealed that a Panama-based law firm, Mossack Fonseca, helped foreign politicians and the rich and famous hide their assets in offshore companies based in tax havens.
“The Panama Papers is not about Panama,” Varela said in an interview with The Japan Times at a Tokyo hotel.
Varela said that his government has been working closely with the OECD on tax transparency before the Panama Papers scandal broke, and his country is in the process of negotiating tax agreements with other countries.
He also said his government sent a letter of intent to Tokyo last year to begin negotiations over a tax information exchange agreement.
On Tuesday, at an investment seminar in Tokyo, he said his government discussed the matter with Japanese officials, and that the two governments are likely to make an announcement after he meets with Prime Minister Shinzo Abe on Wednesday.
Japan currently has tax information exchange agreements with 10 tax havens, including the Cayman Islands, which has become a popular sanctuary for some Japanese to park their money.
The Finance Ministry did not confirm whether Japan is negotiating such a tax agreement with Panama but said such a pact could help deter tax evasion.
The OECD has been calling on Panama to join the Common Reporting Standard, which requires countries to automatically exchange information about financial institutions, including tax matters, with other countries on an annual basis.
The OECD approved this framework in 2014 at the request of the Group of 20 nations. Fifty-five countries will commit by 2017, and 43 countries, including Japan, will join by 2018.
Varela said his government has been working with the OECD to seek optimal ways to join and implement the framework. He repeated his position from last year at the U.N. General Assembly that Panama will be able to commit to the framework in 2018. Yet he said his country is willing to do it on a bilateral basis rather than multilaterally.
“We are negotiating (with the OECD) and suddenly these Panama Papers appeared and that made the OECD and France make some statements against my country while we ask to solve this through diplomacy,” he said.
Varela’s defense comes at a time when the international community is pressuring Panama to comply with global standards on tax transparency. The G-20 finance ministers and central bankers warned tax havens to cooperate with new transparency standards in their two-day meeting last week in Washington.
France has also stepped up its criticism of Panama, threatening to put it back on its list of uncooperative countries in sharing tax information.
Yet Varela said Panama has “done what is necessary to protect” its financial system and “make it more transparent,” since he took office almost two years ago, even before the damaging revelation.
The country adopted laws to eliminate so-called bearer-stock companies, a form of company that conceals its ownership. And the Panamanian government has also signed and ratified 25 agreements on sharing tax information, including with the United States, which has demanded tougher regulations in Panama.
While the Panama Canal has traditionally been the main driver for the Panamanian economy, the modern banking and financial service sector has also been driving its growth, especially since the 1970s when Panama adopted strict bank secrecy laws.
The Panamanian system, which prevents authorities from accessing bank information, attracted the rich and powerful to hide their wealth. That is why it was put on the blacklist of the OECD and the Financial Action Task Force, an intergovernmental watchdog on money laundering, as Panama was deemed a destination for illicit money.
Now that Panama is under fire, Varela said his government is willing to cooperate with any investigation related with Mossack Fonseca and work with the global community to enhance transparency.
It is also setting up an independent commission of domestic and international experts to examine the Panamanian financial and legal system.
“The idea is to answer these questions that have been made because of the Panama Papers, and to find if there is something that could be improved,” Varela said.