## Panama: Selected Issues

_IMF Staff Country Reports, March 30, 2023_

## Source details

**Canonical URL:** [Panama: Selected Issues](https://www.imf.org/en/publications/cr/issues/2023/03/30/panama-selected-issues-531631)

## Other formats

- [Markdown version](/en/publications/cr/issues/2023/03/30/panama-selected-issues-531631/index.md)
- [Structured JSON version](/en/publications/cr/issues/2023/03/30/panama-selected-issues-531631/index.json)
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## Bibliographic details
- Published: March 30, 2023
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400236662.002

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### Summary and main findings
- 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.

### Analysis of weaknesses and distortions
- 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.

### Policy recommendations and reform direction
- 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.

### Keywords and thematic coverage
- Central banks, Corporate income tax, International organization, International reserves, Monetary policy, Production, Revenue administration, Tax incentives, Taxes, Total factor productivity
- 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.

*International Monetary Fund. "Panama: Selected Issues."*

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## Content in this bundle

- **Panama: Selected Issues; IMF Country Report No. 23/129; February 8, 2023**
  - [Panama: Selected Issues; IMF Country Report No. 23/129; February 8, 2023 (Markdown version)](/-/media/files/publications/cr/2023/english/1panea2023003.pdf.md){rel="alternate" type="text/markdown"}
  - [Panama: Selected Issues; IMF Country Report No. 23/129; February 8, 2023 (PDF)](/-/media/files/publications/cr/2023/english/1panea2023003.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/cr/issues/2023/03/30/panama-selected-issues-531631_