Stop Tax Haven Abuse Act Authors Speak Out Against Panama FTA

Rep. Lloyd Doggett (D-Texas) and Sen. Carl Levin (D-Mich.) released a letter to President Obama today saying that they would not support the Panama FTA unless steps are taken to reform the bank and tax secrecy laws that have made Panama one of the leading offshore tax havens in the world. This is an issue that we've been hammering on for some time, as highlighted today by this quote in CongressDaily:

What impact the tax haven issue has on Panama remains to be seen. If critics like Public Citizen's Lori Wallach have their way, that and other issues will be at the forefront of the trade debate for years to come. She called it "ridiculous" to try to separate governance issues in trade partner countries from the agreements themselves.

"When you think about the rights and powers and connections that those agreements establish, it's like getting married to somebody who you don't know, if they're a murderer and an alcoholic," Wallach said. "So particularly when it's something like a country that repeatedly violates the rule of law ... you don't want to have those kind of tight, tight connections that are affecting your domestic and regulatory legal systems."

Read the full text of the Doggett/Levin letter after the jump.

May 20, 2009

The Honorable Barack Obama
President of the United States
The White House
Washington, DC 20500

Dear Mr. President:

As authors of the Stop Tax Havens Abuse Act which would restrict the use of offshore tax havens and abusive tax shelters, we appreciate Ambassador Kirk's recognition that the Panama Free Trade Agreement should not be approved without first securing Panama's commitment to cooperate with international efforts to combat international tax evasion. Implementing an agreement on trade while ignoring Panama's status as one of the world's recognized tax havens would not only undermine your efforts to address offshore tax evasion, but would also thwart the best opportunity our nation will have to obtain cooperation from a country that has resisted for years American efforts to encourage changes to its secretive banking and regulatory practices.

The United States has been engaged in negotiations with Panama on a tax information exchange agreement (TIEA) since 2002, with no progress to show for the effort. In fact, despite committing to the OECD internationally agreed tax standard in 2002, which calls for the exchange of information on request in all tax matters for the administration and enforcement of domestic law, Panama has not signed a tax treaty or a TIEA with any country. Panama is also home to large numbers of offshore banks and shell corporations. Its multiple levels of bank secrecy mean that, without an effective TIEA, Panama's portion of the billions of U.S. taxpayer dollars stashed in offshore banks will continue to evade U.S taxation.

Accordingly, we strongly urge that the United States require Panama to sign a TIEA prior to entering into an FTA, and that the implementation of any FTA should not take effect until Panama adopts enabling legislation to amend Panama's domestic laws to allow for sufficient transparency and access to financial and corporate information. Given Panama's history of recalcitrance on this matter, if the United States agrees to the FTA before Panama signs a TIEA and makes the necessary changes to its domestic laws, we will never secure Panama's assistance in preventing tax evasion.

In this time of economic distress, we can no longer afford to ignore the billions of dollars of tax revenue lost to the U.S. Treasury due to the bank secrecy practices of Panama and other tax havens. Given Panama's interest in successfully concluding the U.S.-Panama FTA, it is essential that we not waste the opportunity to insist on real cooperation from Panama in the fight against international tax evasion. Insisting that Panama both sign an effective TIEA and change its bank secrecy laws before the FTA can go into effect sends a strong signal about the commitment of the United States to shutting down tax havens. Both of these steps by Panama are essential to secure our support of the FTA.

We look forward to hearing from you on this important matter.

Sincerely,
Lloyd Doggett, Member of Congress
Carl Levin, United States Senator