Editor's Note: Global Trade Watch wanted to discover exactly how easy it is to set up a corporation in Panama to dodge taxes. They asked Jessica, their college sophomore intern, to attempt the task. Watch above at how ridiculously easy it is for Jessica to set up a Panamanian corporation. After viewing please contact your lawmakers to express your outrage over their decision to move forward with the Panama “free trade” agreement.
Setting up a Panamanian corporation to dodge corporate taxes is so ridiculously easy, even a 20-something college intern can do it - without ever setting foot in Panama or even owning a business, for that matter.
In preparation for the battle over the Panamanian Free Trade Agreement, Public Citizen’s Global Trade Watch has demonstrated just that.
Using only an intern, a phone and the advice of a Panamanian lawyer, the group found that all that is required to set up your very own offshore tax haven is a passport, a bank reference letter, information about your professional activities and information about the “company” - all of which can conveniently be sent through email. At that point, you pay the required fees and 32 hours later you are the proud new owner of a tax evading Panamanian corporation.
The intern is told by the unsuspecting lawyer that she has no need to worry about the U.S. government catching up to her for tax evasion because setting up a Panamanian shell company to avoid taxes is akin to “totally removing yourself from the legal trail.” Furthermore, the lawyer alleviates her concerns about the impending Panamanian “free trade” agreement and its effects on Panamanian banking secrecy by assuring her that nothing will change because “they would have to change the way everything works here in Panama.”
The ease at which an offshore tax haven in Panama can be set up underscores how tragically flawed the proposed “free trade” agreement is. If pushed through Congress, as U.S. Trade Representative Ron Kirk indicated he would like to see happen, American taxpayers stand to lose billions, according to a report released by Public Citizen.
The U.S. Treasury Department loses approximately $100 billion each and every year due to American businesses utilizing tax havens.
Panama is well-known as a tax haven. Recently, it was one of 13 countries found on all of the major tax-haven watchdog lists that also does not have U.S. tax transparency treaties. Panama also happens to be the only country on that list that the American government is currently seeking to finalize a “free trade” agreement with. If it does, the U.S. would potentially be ceding billions of dollars in tax revenues.
350,000 foreign subsidiaries are located in the country to take advantage of the nation’s lax tax laws, usually in the form of offshore shell companies and fake headquarters. This makes it the second most popular destination in the world for multinational corporations seeking to avoid taxes, behind only Hong Kong.
Even bailed out American companies have circumvented American tax laws by setting up subsidiaries in Panama. Citigroup currently has 13, while Morgan Stanley and American Express each have one.
Other American companies operating in Panama include corporate giants such as Caterpillar, Dell, General Mills, Johnson & Johnson, Kraft Foods, Merck, PepsiCo, and Proctor & Gamble.
“At a time of massive public anger at Wall Street, the Panama FTA is the wrong handout for the wrong interests,” said Todd Tucker, research director of Public Citizen’s Global Trade Watch division. “President Obama campaigned on the need for a change in our trade policies and a crack-down on tax loopholes that promote offshoring, so implementing a Bush NAFTA-style trade agreement with one of the world’s major tax havens is pretty obviously not the way to go.”
To take action, you can visit Public Citizen’s Web site ( here) and contact your lawmakers to express your outrage that they would even consider moving forward with a “free trade” agreement that would award tax evading multinational companies while punishing hard-working Americans and companies that play by the rules.
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