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Colombia’s Tax-Haven Sanction a Badge of Honor for Panama

By: Javier Garay - @Crittiko - Oct 20, 2014, 10:39 am
The Juan Manuel Santos administration would have us believe that the free Panamanian economy is dangerous.
The Juan Manuel Santos administration would have us believe that the free Panamanian economy is dangerous. (Flickr)

EspañolIt’s one thing for the Juan Manuel Santos administration to become another mundane and annoying example of political correctness in Latin America, but it’s quite another for it to discard what it had in the past.

Recently, the Santos administration placed Panama, a traditional Colombian ally, on its list of international tax havens. Panama’s inclusion on this list, however, should not be considered a negative. Panamanian officials should be flattered to have been recognized for their respect for private property, unlike the vultures in other Latin-American countries (this is, by the way, the correct use of the term “vultures,” unlike the Argentinean government’s use of the word).

But it isn’t so simple. Being labeled a tax haven is undesirable, and Panama has reacted antagonistically to the not-so-neighborly accusation. The unfortunate reality is that, while indictments and retaliation are traded between governments, it is each country’s citizens who will suffer as a result.

Of course, this doesn’t matter much to President Juan Manuel Santos, as demonstrated by his tolerance for Venezuelan government actions taken against Colombian citizens. However, it is a clear indicator of his preference in allies. Colombia doesn’t care what comes to light in Venezuela, or about the sort of rhetoric coming from Ecuador, Bolivia, or Argentina. What Santos will not stand for, however, is Panama’s economic model, and his administration aims to convince us that it is negatively affecting Colombians.

Some might argue that Colombia’s stance against Panama is justified. Recent articles suggest Panama is a safe route for illegal weapons traffickers, and other countries have also identified Panama as a tax haven and say that, at the end of the day, the country refuses to “cooperate.”

First, it is typical for the Colombian government to outsource its responsibilities. Despite the fact that Colombia’s ongoing conflict is domestic in nature, we have come to think of it as an international problem, whether because blame is often externalized or because US taxpayers fund the war on drugs and the fight against the guerrilla through Plan Colombia. Moreover, gun trafficking has less to do with the existence of the Panama Canal, and more to do with prohibitions in the gun market.

Second, the fact that other countries have sanctioned Panama does not mean Colombia is justified in doing so as well. Panama is an important trade partner and provides an example of a much more open economic model that Colombia would do well to consider. In addition, following in the footsteps of countries like Ecuador and Argentina is never a good sign.

With regard to Panama’s “refusal to cooperate,” this gets us to the root of the problem. What exactly does this mean? In Colombia’s case, it means Panamanian officials did not sign on to the agreement to exchange tax information on their residents. In other words, Colombia wants to know what monetary resources have remained under the radar of tax authorities in order to tax them.

The question then is: why, and to what end? The government says they want to build more hospitals and schools, and finance other post-conflict projects. The reality, however, is that this money will likely go towards building a larger bureaucracy and further corruption.

Even if the government’s goals were noble, why should people who don’t want to pay be prosecuted? We come back to the question of who is really serving whom. The state is supposed to serve its citizens, not the other way around. This is no justifiable reason for any member of society to feel he should receive a “fair part” of the wealth accumulated by someone else.

Furthermore, if a group of citizens decide to hide their incomes in Panama, it’s because the Colombian government behaves like vultures, scavenging at resources that don’t belong to them. In fact, former ministers, like Alberto Carrasquilla, have previously stated that it would be false to consider Colombia’s tax burden as low.

Despite all this, the Colombian government continues to make decisions that adversely affect its citizens. Antagonizing Panama will surely cause retaliation, leading to greater bureaucracy, discrimination, and restricted visas, further harming Colombian citizens.

The Colombian government is not only failing to deliver on its promise to protect its citizens, but falsely claiming that Panama’s tax policy is harming Colombians, all in an effort to take as much from the individual as possible for the good of the “collective.” The Santos administration will even disrupt international relations just to have its citizens hand over more of their assets, even when we all know the money is destined to line the pockets of a select few politicians.

Translated by Peter Sacco. Edited by Guillermo Jimenez.

Javier Garay Javier Garay

Javier Garay is a professor at the Externado University of Colombia. He has written two books on international issues, such as development, after his doctoral dissertation focused on the same topic. Follow him on Twitter @crittiko and through his personal blog, Crittiko.