In terms of the economic proposals of the presidential candidates, there is a lack of measures indicating a possible tax reform, either partial or comprehensive, in a future government. This absence could be attributed to the political cost that a tax increase would imply for citizens..
The recent report "Panorama of Opportunities Panama", prepared and published by the Inter-American Development Bank (IDB), highlights that Panama has one of the lowest tax collection rates in Latin America and the Caribbean, representing only 8.5% of the Gross Domestic Product (GDP), in contrast to the regional average of 16%. In addition, evasion of the Tax on the Transfer of Movable Goods and Services (ITBMS) is estimated at 40%, while tax expenditure on corporate income tax ranges between 1% and 1.5% of GDP.
Given this fiscal outlook, there is an expectation of a necessary tax reform in the coming years.
In the economic proposals of the presidential candidates, there is no indication of a possible tax reform in an eventual government. It is likely that this omission is due to the fear of the political impact that a tax increase on citizens would entail.
However, what is at stake is not simply to analyze the political feasibility of a tax reform in the future, but rather to initiate a debate on the urgency of a tax reform that has as its main objective tax progressivity. This would make it possible to increase the country's tax revenues, reduce the fiscal deficit and guarantee adequate financing for fundamental sectors such as education and health, pillars of the social contract.
Within a tax reform aimed at increasing tax revenues, two main approaches could be implemented: increasing tax rates and modernizing the tax system as a whole. In this sense, it is considered that it would not be necessary to increase the general rates of the ITBMS or the Income Tax. Instead, it is proposed to modernize the main taxes, ensuring the taxpaying capacity, taxpayers' rights and the collection efficiency of the tax administration.
To achieve this modernization, it will be crucial to develop tax regulations that strengthen tax liability, clearly define taxpayers' responsibilities and encourage voluntary compliance programs that promote tax awareness. Regarding taxpayers' rights, it is suggested to review the determination and defense procedures established in the Tax Procedure Code, as well as to unify the anti-abuse clauses to guarantee taxpayers' legal security, among other aspects of tax law.
In summary, the need for tax reform in Panama is undeniable, and its focus should be on tax progressivity, modernization of key taxes and protection of taxpayers' rights. This debate is fundamental for the economic and social development of the country in the coming years.
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