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Title of the Article: Panama

Panama has no strict corporate law making it very easy for individuals to open a company

without following rules and regulations. Companies and their shareholders has been kept

confidential under law and any violation to privacy, attracts severe penalties. Financial

institutions also work under very strict laws and are not allowed to provide account owners

details, except for cases related to terrorism, drug trafficking and other serious crimes. Panama

has never signed any tax clauses with any country, hence protecting individual foreigners.

Offshore banking centers played an important role in developing post-war world finance. It

reduced cost of international cash flow and improved businesses. On the other hand it affected

stability of many countries globally by keeping corrupt capital. Through all these it created

opportunities for tax evasion, capital flight and money with economies in transition. For

example, former Ukrainian Prime Minister Lazarenko used his power to buy oil from Russia at a

low price and then sold it at a high price in the Ukrainian market for profit. A considerable part

of the illegal proceeds went to offshore financial centers. In these places where Moscow is less

powerful, people who are busy turning public into private can legally launder money, and those

who have turned public into private can substantially avoid tax.

In 2020, the EU updated its tax avoidance blacklist and included Panama in it. Countries on the

blacklist faces reputational losses, stricter scrutiny of financial transactions and the risk of losing

EU funds. Panama’s investment funds can not reflect the actual economic activities of the islands
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and their tax information exchange is insufficient. Because of this it was blacklisted by the

financial action task force, a global regulator, for the money laundering gap.

It is strategically located in Central America, where it can quickly register a company and has

many preferential legal measures, which can avoid the worry of business owners that their

behavior does not comply with international laws and regulations. It has hundreds of banks and

thousands of registered companies. The overseas assets are hidden by powerful political class

and influential individuals.

Registration of a company is very easy because it does not require many conditions. Financial

statement is not a requirement for a registered company. Taxation is also not a must except

payment for the annual license to register company locally. Panama’s tax haven has led to

financial instability to the global economy.