Panama is at a crucial moment regarding the adaptation of its tax system, particularly as it relates to the digital economy. The need to implement taxes that cover both transportation platforms such as Uber and inDrive, as well as e-commerce giants such as Amazon, Temu, AliExpress, Ebay, and Shein, as well as streaming services such as Netflix, Apple TV, Prime Video and MAX, has gained relevance in the country's economic discourse. This reflection has been emphasized by the new president of the International Fiscal Association (IFA), Panama Chapter, José Galíndez, who stressed that these are issues that require immediate attention.
Galindez points to the urgency of carrying out a profound tax reform that not only boosts competitiveness, but also attracts foreign investment. The country's ability to be efficient in tax collection lies in the modernization of its tax system. In this regard, one of the key proposals is the adoption of the Global Minimum Tax for multinational companies operating in the country. This tax has already been implemented in several European nations; therefore, its inaction in Panama could result in lost collection opportunities, given that other jurisdictions could capture the attention of multinationals.
"Panama's adoption of the Global Minimum Tax is essential, and we consider it a viable option in a first phase," Galindez stressed. He also emphasized the need to modernize the tax system through the creation of a Tax Procedure Code that guarantees the rights of taxpayers. He also suggested a modification of the Income Tax to make the Panamanian regime more attractive to foreign direct investment. In his view, the Tax on the Transfer of Movable Goods (ITBMS) should be transformed into a Value Added Tax (VAT) to improve collection efficiency.
Gerardo Herrera, tax expert and IFA member, complemented these ideas by pointing out that fiscal consolidation in Panama should encompass a comprehensive review of the incentives platform and improvement in tax management through the use of technology, which could mitigate the risk of tax evasion. "Panama should reevaluate its approach to taxation of the digital economy, starting with indirect taxes and then considering direct taxes," Herrera added, appealing to the need to consider the consumption of intangibles coming from platforms such as Netflix and Amazon.
The election of the new IFA board for the 2024-2026 term, led by José Luis Galíndez, also brought with it a renewed commitment towards promoting a robust tax culture in Panama. Amanda Barraza, outgoing president, argued that tax knowledge among citizens is still elementary or non-existent. "It is essential that all citizens understand how taxes work, given that we are all taxpayers," she said.
In summary, Panama faces significant challenges in modernizing its tax system, especially in the context of the digital economy and the presence of multinationals. With the new IFA directive and the pressure to adapt tax policies, these are crucial times to rethink and strengthen the country's tax framework so that it positions itself favorably in a competitive global environment.
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