Following over a year of discussions, Panama has enacted Law 70 of 2019, which classifies tax evasion as a crime. The country’s government hopes that the development will keep Panama off future OECD and EU blacklists.
Tax evasion is classified in most countries as a criminal act and is seen as a predicate offense to money laundering, and the Financial Action Task Force (FATF) recommends that it is defined as such.
Under Panama’s Law 70 of 2019, sanctioned by President Juan Carlos Varela on January 31, 2019, any individual intentionally evading taxes of USD300,000 or higher in a calendar year will be punished with a prison sentence of between two and five years, as well as a financial penalty of between two and ten times the amount evaded.
Further, if an individual is found to have laundered proceeds from tax fraud, they will be liable for a prison sentence of between two and four years. Other money laundering crimes in Panama are punishable with higher prison sentences, of up to 12 years.
The law has been enacted as part of Panama’s move to avoid blacklisting by the EU and OECD. As recently as December 2018, the government’s Ministry of Economy and Finance warned that if the National Assembly of Panama did not pass the law, Panama would risk re-entering the FATF grey list.
However, some political opponents of the law have argued that it will make little overall impact as the penalties start only at USD300,000: they argue it may be used as a political weapon instead .
It was reported on February 8 that the European Commission is considering naming Panama on its list of high-risk countries that are failing to combat money laundering; it is unclear if this will happen or if the new law will prevent this.