Sanders Foresaw The Panama Papers Scandal in 2011, As Shown in This Video Clip
In 2025, Panama continues to be recognised as a tax haven, despite recent legal reforms and partial removal from high-risk financial crime lists. The country's territorial tax system and offshore structures remain facilitators for tax evasion, despite international cooperation efforts.
Panama's removal from the European Union's tax haven list is contingent on the enactment of laws ensuring companies maintain a substantial physical presence locally, with a potential deadline in September 2025 for potential removal from that list at the EU's October 2025 review.
The Panamanian government has made reforms in response to the 2016 Panama Papers leak, including the criminalisation of tax evasion, increased transparency, and sharing financial information with over 100 countries. However, experts and critics note that implementation has been weak, enforcement limited, and the country’s strategic position as a financial and logistical hub continues to expose it to cross-border money laundering risks.
The U.S.-Panama Trade Promotion Agreement, effective since 2012, primarily focuses on trade liberalization and does not provide explicit enforcement mechanisms directly targeting offshore tax evasion. However, U.S. law imposes stringent reporting and penalty requirements on U.S. taxpayers who fail to disclose foreign assets, with fines up to $50,000 and extra taxes on undisclosed income reaching 40%, encouraging compliance to combat offshore tax evasion.
The combined effect of Panama's reforms and international pressure has improved transparency but Panama’s offshore financial sector still poses challenges for the full elimination of tax evasion risks. The reforms and Panama’s ongoing efforts to comply with international norms could help reduce illicit flows and thus improve U.S. tax revenue collection indirectly, but persistent weaknesses in enforcement and the territorial tax system remain critical factors.
Senator Bernie Sanders, who has consistently expressed concerns about income and wealth inequality in the United States, argued that the Panama Free Trade Agreement would make the situation of tax evasion worse. The evasion of taxes by wealthy individuals and corporations is estimated to be millions of dollars each year, according to Sanders.
The Panama Papers leak, which exposed the extent of tax evasion by wealthy Americans and large corporations in Panama, shed light on how some international elites use Panama as a tax haven. The leak has embarrassed public officials worldwide and led to calls for resignation in Iceland.
As the situation remains dynamic, international pressure continues to motivate further reforms in Panama, and ongoing evaluation of progress by organisations like the EU, FATF, and OECD will be crucial in ensuring Panama's compliance with international norms.
- The ongoing evaluation by organizations like the EU, FATF, and OECD will be crucial in assessing Panama's compliance with international norms, particularly in the areas of policy-and-legislation, such as the enactment of laws ensuring companies maintain a substantial physical presence locally to avoid being classified as a tax haven.
- The debates surrounding the Panama Free Trade Agreement have highlighted the role of politics in addressing issues like tax evasion, with Senator Bernie Sanders expressing concerns about the potential worsening of tax evasion situations due to the agreement.
