Might the high court void Panama City’s tax hike for lack of consultation?

The thing about the mayor, with his artificial beach that would need constant sand replacement, and on a horribly polluted part of Panama Bay; and with his idea to replace a reasonably good seafood market with a traffic nightmare, and so on…. His money-driven projects have been so at odds with both reality and those who would be affected that they tend to come to naught. Photo of Mayor Fábrega by the alcaldia.

Supreme Court to rule on the city’s
tax hike on local businesses

by Eric Jackson

Lemme see, against the traditional trend, and down in the polls — what can PRD politicians pull out of the bag of corny tricks?

Recall last year — a president who’s also a rancher and who had famously resigned as Martín Torrijos’s agriculture minister to protest Panama’s “free trade” deal with the USA got surprisingly “realistic” and neoliberal on his arrival at the Presidencia. The worldwide inflation had its roots in an epidemic and a war in one of the world’s great grain-producing regions but Nito also stood by as the ownership of the Panamanian telecommunications industry concentrated and raised prices. An entrenched drug importers’ cartel gave us the region’s highest medicine prices as an epidemic raged. Fuel prices were way up, especially to the chagrin of those who drove for a living. Many of the public school teachers had not been paid.

The president, ailing with a rare blood cancer, went up to the United States for special treatment and left is banking lawyer VP with the fake smile in charge. The better of the teachers’ unions walked out and a great many other working people — including the agricultural produce truckers — joined them. The traditional form of popular protest against government policies — blockage of the roads — ensued for a chaotic July.

So promises, even decrees, were made. A “national dialogue” was convened. The Catholic Church pulled out of the “dialogue” in disgust. Promises, even decrees, were broken. Nearly a year later teachers’ unions are talking about what to do about their unpaid members.

But last August, as the national crisis was easing and people were paying attention to the national dialogue, politicians in the capital were pulling a fast one. With little notice, no formal hearings and the reporters looking at other things, Mayor Fábrega and 19 of the city’s 23 representantes passed a tax hike on Panama City businesses.

A few people did notice and question. So assurances and excuses were forthcoming.

Who are the vast majority of people doing business in the city? It’s the informal sector, which nationwide comprises about half of Panama’s work force. The guy who sells fruit at the traffic intersection. The lady who does pedicures and toenail painting on a sidewalk adjacent to Avenida Central. The man who plays his instrument for what people toss in the hat. The woman who roasts and sells meat on a stick. The photographer, the writer, the courier who isn’t on anybody’s payroll. Mayor José Luis Fábrega Polleri, a mechanical engineer by training and a legislator before he got to city hall, assured THOSE folks that he didn’t intend to tax THEM. The mechanics of extracting blood from stones, you see, don’t especially work.

When businesspeople who were expected to pay noticed, they were blown off by a classic from the multi-partisan bag of Panamanian political tricks. They didn’t NEED to be consulted, you see, because this was not a tax increase but a tax “reorganization.” It was hidden in a resolution about a moratorium on tax and interest payments in the wake of the COVID disaster, the ticket to which the reporters paid their attention. (Ye olde “camarón,” they call this oft-pulled stunt in Panamanian politics.) Citing God, city council president Yoira Perea said she was surprised that anyone would complain.

PLUS, in the absence of anything recognizable as public hearings, the city’s PRD pols pulled out a new requirement — to register an objection someone had to do so in writing through the municipal treasury department. Is there a form for that? They didn’t say, and certainly didn’t publish that.

One of the nation’s business leaders, Panamanian Business Executives Association president Temístocles Rosas, put it this way: Resolution 142 of August 2, 2022 was presented “in a very particular way, highlighting the moratorium but concealing the tax hike.”

One guy who wasn’t long fooled was one of Panama’s activist “people’s lawyers,” Ernesto Cedeño. But even then it took him much time and effort to gather such facts as were allowed to be known and file his lawsuit. That happened this past February 7, and he was soon joined by the heads of the Chamber of Commerce (CCIAP) and the business execs’ association (APEDE). Two of the key witnesses were dissident Panameñista representantes, Ricky Domínguez from Bella Vista and Willie Bermúdez from Don Bosco.

Just a party-line thing? Where was the upwelling of support for the tax hike from the PRD’s Entrepreneurial Front, an important part of the torrijista donor base? And are there actually any Omar Torrijos fans out there, in the city’s PRD rank-and-file, or perhaps more importantly among the Cortizo appointees to the high court? The general actually did have something to say about the matter of consulting people. It’s one of his more celebrated sayings: 

“He who consults more errs less.”

In next year’s elections the PRD is likely to be fragmented at the presidential level, with former PRD president Martín Torrijos — the general’s son — in an alliance with the former Christian Democratic Partido Popular and PRD legislator Zulay Rodríguez running as a neofascist independent. It’s not a stretch to imagine such divisions down at the municipal level as well. This time, with an unpopular tax increase during hard times to bludgeon the incumbents.

On a global level, the PRD, like Spain’s Socialist Workers Party, the British Labour Party, Canada’s New Democratic Party, the German Social Democrats and so on, is a member of the Socialist International. But the Panamanian left has long complained that the Democratic Revolutionary Party isn’t very revolutionary, nor very democratic, nor for that matter committed to any sort of socialist principles. Yet sprinkled among the base, there are many who believe in the stated principles. 

The lawsuit

Cedeño’s lawsuit to nullify the tax hike was promptly accepted by Magistrate Carlos Vásquez. That action was supposed to stay any city action on the tax hike, but some business owners complain that after the measure’s suspension while the matter was before the court, city tax collectors demanded, or collected, the increased amount.

Do we get out of Panamanian law’s favorite realm, the intricacies of procedure, and take a more gringocentric look at economic realities? This is the main reason why Fábrega, and his party’s representantes — those of which entertainer, activist and commentator Rubén Blades describes as a “political patronage party” — so badly need to collect more taxes at the moment:

(A chart of the growth of the municipal payroll under Mayor Fábrega.)

First reports, however, are that in the initial investigative phase of the Supreme Court case the plaintiffs are being grilled about when they learned about the tax hike and if or when they filed some written objection. Does it mean an inclination to rule for the city on some procedural ground? We shall see.

In any case, the tax hike is suspended until a decision is announced, and if that upholds the tax increase it will be a campaign issue for next year’s elections, surely not just at the municipal level.


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