Tax reform is a topic of great importance in any country, and Panama is no exception. In this context, the 2024 International Monetary Fund (IMF) Consultation Mission report has highlighted the need to broaden the tax base in the country by reducing exemptions, deductions, and overall fiscal spending. It is noted that many of the existing exemptions in the Panamanian tax system are regressive and primarily benefit high-income taxpayers.
The IMF has suggested to the Panamanian government to streamline tax exemptions by simplifying those related to the Tax on the Transfer of Movable Property and Services (ITBMS) and the refund process, reviewing exemptions and deductions of personal income tax, as well as fiscal incentives for corporate income tax. Additionally, there is a proposal to increase tax rates, raise ITBMS rates, and adjust upward excise taxes on cigarettes and fuels.
One of the most prominent recommendations from the IMF is the adoption of a Global Minimum Tax for multinational groups with revenues exceeding 750 million euros and not subject to an effective rate of 15% on a consolidated basis of affiliates and subsidiaries in the country. Such measures aim to ensure greater fairness in the tax system and prevent tax avoidance by large corporations.
In this context, it is crucial for the designers of the tax reform in Panama to focus on establishing taxable events that take into account the economic capacity of taxpayers, while respecting the principle of legality and implementing effective fiscal control regulations to combat evasion and promote voluntary tax compliance. Additionally, a comprehensive transformation within the General Revenue Directorate is necessary to develop a service-oriented vision for taxpayers.
In the next five years, policymakers in Panama will need to develop a clear and effective narrative that brings about significant changes in the country's tax system, aiming to meet revenue targets and ensure fiscal sustainability through tax income. This will enable the government to implement public policies focused on reducing poverty and inequality, thereby contributing to the economic and social development of the nation.
In summary, tax reform in Panama is a challenge that demands concrete and well-founded measures to promote equity, efficiency, and transparency in the country's fiscal system. Only through a comprehensive and collaborative approach involving the government, the private sector, and society as a whole, can progress be made towards a fairer and more equitable tax system that enhances the well-being of all Panamanians.
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