Debate on tax reforms has begun

PANAMA. Discussion of the government’s proposed tax changes - which aim to increase tax revenues by $225 million this year - opened yesterday in the National Assembly’s Treasury Commission.

First up for debate were the proposals to raise $100 million of this from taxes to the Colon Duty Free Zone (ZLC).

The owners of around 50 of the largest businesses, who are responsible for about 90 percent of movement of ZLC goods, agreed in a closed meeting on Monday to back the agreement hammered out between their representatives and Treasury officials at the weekend.

However, they have also come up with their own list of counterproposals suggesting ways for the government to increase revenue from the ZLC without imposing taxes.

Their proposals include increasing warehouse rents, increase administrative charges per shipment (now $12.50), and increasing the annual flat fee - currently $3,000 - that is charged to all businesses using the zone.

However, smaller ZLC business owners who, in the main part, do less than $1 million business per year, do not agree with theproposals, arguing that fees should be charged according to the size of the business and not according to fixed rates.

Why should someone who is making $10 million of sales a month pay the same as someone who only makes $400,000 in sales throughout the year, they said.

The head of the Assemby’s Treasury Commission, Jose Blandon, said that in the past, the economic powers in the country had used their influence to persuade previous governments to give them preferential and “very flexible” tax breaks, and that the burden of taxes has been paid by salaried workers.

Now the government is “trying to make them (the ZLC) pay more without affecting their ability to compete,” he said.

The president of Panama’s Business Executive Association (APEDE), Ruben Castillo, warns that tax proposals as they stand amount to an attack on juridical security at a time when investors are looking for clear cut rules.

Martinelli is pushing for tax reform to pay to implement the promises he made during his election campaign.