letters

Editor's Note: Following a letter published about the subject in the last issue, I have received many more requests to do an email notice of new issues. It's something that I usually do in part, but to do it properly the email list would have to be updated and expanded and someone would have to get the notices out. Quite frankly, it's extra work when I'm having enough trouble keeping up with things as it is. So if I can get a volunteer to do these tasks I will be glad to add that feature to The Panama News. If not, then I won't.

Thank you for your article about the Tupper Center. The photographs are delightful. Simply fantastic!! It is wonderful to see (even if only in a limited way) the bouquet of Panama, and I'm not just referring to the flowers, but all aspects of your country.

Paul Newman
South Africa

I want to make a comment to your editorial that's found at http://www.thepanamanews.com/pn/v_11/issue_02/editorial.html and in part reads as follows:

"We would also do well to consider the costs of going into business in Panama, which go well beyond taxes and into various filing fees and requirements that lawyers or CPAs file many documents. Added up, these costs are much higher than the norm in the industrialized countries. It's no big deal for large businesses, but for the little companies that collectively create the most jobs it's a major burden, and one of thereasons why such a large percentage of our small business sector is now in the informal economy.

"Protests, mostly by business interests, caused the government to back down 2 to 1.4 percent on the corporate tax on gross receipts and restore part of the tax break for large corporate charitable donations. The increased corporate filing fee will not apply to start-ups. These are minor variations on the theme that taxes are going up."

One of the silliest things in this new tax reform is that the "TasaUnica" (which is being raised from $250 to $350, except for the year of incorporation) has to be paid at the time a corporation is registered. That means that the actual physical cost of incorporating a a company just went up, although only to those who don't pay the "Tasa Unica" right after incorporation (some attorneys, my firm being one, include the first "Tasa Unica" in any incorporation package, under the idea that it is simpler for people to get all their documents at the time of incorporation --- it's basically a service thing).

However, you may ask why don't some people pay the "Tasa Unica" right at incorporation? Well, of course some people don't because they are fly-by-nights which will only use a corporation for a one-time transaction (this is mostly the case for offshore business).

But I have also noticed that a lot of PYMES (mainly small companies) don't pay the "Tasa" at incorporation figuring that if they are still in business a year later, they will pay the $50 surcharge on the $250 first "Tasa." And if not, well, it was a very much needed $250 which at least was used up trying to put up the good fight of getting a business off the ground (and failing) as opposed to just paying it to the government.

An interesting side effect of having to pay the $250 "Tasa" at incorporation is that it is very likely that most sole practitioners/small law firms will be unable to incorporate many corporations (especially for off-shore purposes), since incorporation costs just went up (a dirty secret in the profession is that notarial and registration fees for a cookie-cutter, $10,000 in par value stock corporation/500 shares of non-par value corporation are only around $120-$130 --- however, the need to pay the "Tasa" at the Public Registry when incorporating immediately raises real incorporation costs to $370-$380).

So in a way, the legal market in Panama becomes more segmented between the haves and have nots....

Juan Ramón Vallarino J.
Attorney at Law
Vllarino, Vallarino & García-Maritano

There seems to be a common misconception that CR has recently changed its tax laws to the extent that ex-pats are adversely affected.

This, in fact has not occurred and the one proposal that was considered was either dropped or is stagnant. After the failure of the Brothers Ponzi several disgruntled investors began flooding NGs with false assertions in the hope of damaging CR immigration in some way.

As a hopeful future CR resident I follow as much as I can of the politics, especially in the realm of taxation.

You said --- "this is what has evidently happened in CR."

Perhaps you know something I don't?

Jim Martin

As a partner in a business preparing to set up a manufacturing and research and development facility in Panama (I will be UK based) providing upwards of fourteen new jobs for locals at good rates of pay in the first months and we hope 48+ jobs at good rates of pay within two years and with one of the two partners in the business, who is to live in Panama, receiving a foreign earned and taxed (UK) pension we have several observations:

1. Taxes should be raised and by taxing, at a reasonable rate those individuals whose earnings in Panama can bear this. To tax the lowest earners is wrong. To tax earnings on a scaled rate as in Europe and the US is fair if the starting point (salary) excludes the least well off.

2. Tax revenues must be enough cover a countries key social and security needs without reliance on external revenue sources e.g. the Canal. Hypothecating taxes for specific costs is also a good idea as people can see where their revenue is used e.g. General taxation (infrastructure, Police, Defense), Health and Social taxation (social medicine and welfare provision), Pension provision (whether invested, used to pay current retirees or both).

3. Tax must be seen to be equal in its application. So a small tax on fuel and luxury goods is helpful, a low surcharge here of 10% provides valuable revenue for all government programs and affects the well off the most.

4. Tax rules need to be very simple, easily understood and easy and low or no cost to comply with.

5. The small enterprises that provide so much employment and together with "one person" businesses and small partnership operations need the simplest rules of all.
For example taxing the business as the individuals rather than as a corporation for simplicity and transparency.

6. Taxing a pension already taxed abroad would cause a massive loss of current and potential hard currency influx. This breaches generally understood principles.

Instead why not reduce the discounts to pension receivers on higher levels of income? This would still offer some discount as an incentive to pensioners to move to Panama, provide savings to the Government and national institutions and be seen as socially responsible by current and potential future retirees?

Nicholas Alan Hole
UK

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