{
  "title": "Panama: Selected Issues",
  "publication": "IMF Staff Country Reports, March 30, 2023",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2023/03/30/panama-selected-issues-531631",
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  "summary": "This Selected Issues paper presents the main features and weaknesses of the current Panamanian tax system and provides an international comparison of its performance. Panama’s macroeconomic performance has been notably robust.",
  "sections": [
    {
      "heading": "Summary and main findings",
      "content": "- The paper presents the main features and weaknesses of the current Panamanian tax system and provides an international comparison of its performance.\n- Panama’s macroeconomic performance has been notably robust.\n- Panama’s tax collection has been historically low.\n- A tax system without adequate revenues led to chronic fiscal deficits and a lack of resources to invest in human capital (education and health) and promote social inclusion policies.\n- The tax system is notably regressive.\n- Several rules are described as very inefficient and distortive, contradicting the overall policy objective of the country to attract investment.\n- Taxation of the business sector is very complex.\n- The system is very generous regarding benefits."
    },
    {
      "heading": "Analysis of weaknesses and distortions",
      "content": "- Low tax collection has constrained fiscal capacity and public investment in education and health.\n- Regressivity: the tax structure disproportionately affects lower-income groups (described as \"notably regressive\").\n- Complexity and inefficiency in business taxation: multiple business taxes and strict loss carry forward are highlighted as inefficient parts of the system.\n- Generosity of benefits and numerous tax incentives reduce revenue and create distortions.\n- Existing rules include weak anti-abuse protections, increasing opportunities for tax avoidance and undermining revenue performance."
    },
    {
      "heading": "Policy recommendations and reform direction",
      "content": "- Reduce tax incentives after careful analysis of each incentive’s costs and benefits.\n- Strengthen anti-abuse provisions to limit avoidance and improve compliance.\n- Use revenues from an international minimum tax to finance reductions in inefficient parts of the tax system.\n- Targeted reforms to eliminate or simplify multiple business taxes and to relax the strict loss carry forward provisions to reduce distortions and complexity.\n- Reforms aim to balance the objective of attracting investment with improved revenue mobilization and reduced regressivity."
    },
    {
      "heading": "Keywords and thematic coverage",
      "content": "- Central banks, Corporate income tax, International organization, International reserves, Monetary policy, Production, Revenue administration, Tax incentives, Taxes, Total factor productivity\n- Geographic and thematic tags include Asia and Pacific, Caribbean, Central America, Global, South America; topics include C. consumption tax, VAT indicator, tax comparison, revenue performance, directorate General.\n\nInternational Monetary Fund. \"Panama: Selected Issues.\"\n\n---\n\n Content in this bundle\n\n- Panama: Selected Issues; IMF Country Report No. 23/129; February 8, 2023\n  - Panama: Selected Issues; IMF Country Report No. 23/129; February 8, 2023 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Panama: Selected Issues; IMF Country Report No. 23/129; February 8, 2023 (PDF){rel=\"external\" type=\"application/pdf\"}"
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    "Published: March 30, 2023",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9798400236662.002",
    "The paper presents the main features and weaknesses of the current Panamanian tax system and provides an international comparison of its performance.",
    "Panama’s macroeconomic performance has been notably robust.",
    "Panama’s tax collection has been historically low.",
    "A tax system without adequate revenues led to chronic fiscal deficits and a lack of resources to invest in human capital (education and health) and promote social inclusion policies.",
    "The tax system is notably regressive.",
    "Several rules are described as very inefficient and distortive, contradicting the overall policy objective of the country to attract investment.",
    "Taxation of the business sector is very complex.",
    "The system is very generous regarding benefits.",
    "Low tax collection has constrained fiscal capacity and public investment in education and health.",
    "Regressivity: the tax structure disproportionately affects lower-income groups (described as \"notably regressive\").",
    "Complexity and inefficiency in business taxation: multiple business taxes and strict loss carry forward are highlighted as inefficient parts of the system.",
    "Generosity of benefits and numerous tax incentives reduce revenue and create distortions.",
    "Existing rules include weak anti-abuse protections, increasing opportunities for tax avoidance and undermining revenue performance.",
    "Reduce tax incentives after careful analysis of each incentive’s costs and benefits.",
    "Strengthen anti-abuse provisions to limit avoidance and improve compliance.",
    "Use revenues from an international minimum tax to finance reductions in inefficient parts of the tax system.",
    "Targeted reforms to eliminate or simplify multiple business taxes and to relax the strict loss carry forward provisions to reduce distortions and complexity.",
    "Reforms aim to balance the objective of attracting investment with improved revenue mobilization and reduced regressivity.",
    "Geographic and thematic tags include Asia and Pacific, Caribbean, Central America, Global, South America; topics include C. consumption tax, VAT indicator, tax comparison, revenue performance, directorate General.",
    "**Panama: Selected Issues; IMF Country Report No. 23/129; February 8, 2023**"
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