Geithner: "Don’t Ask, Don’t Tell" - In Panama

The US signed a tax treaty with Panama yesterday. This is another of those steps in the right direction toward eliminating offshore bank accounts of US persons. But this treaty falls far short of its goals in my opinion.

The full treaty document can be found here. The section that is troubling me is 5(5)(a):

5. Any request for information made by a Party shall be framed with the greatest degree of specificity possible. In all cases, such requests shall specify in writing the following:

(a) the identity of the taxpayer whose tax or criminal liability is at issue;

I’m no lawyer, but my reading of this is that the US has the right to request information regarding a specific name. But the US does not have the right to receive information regarding all the other US names that have accounts in Panama. In order for the US to get information from Panama it has to first have a probable cause that an individual has an account; then it must exhaust all possible options to obtain the information without asking Panama.

While this new treaty does go someway toward closing the window of hot money bank accounts of US persons in Panama it is just a halfway step. I’m wondering, "Why"?

The US still has some clout in this matter. They should have insisted that Panama establish rules that obligated its banks to disclose the existence of an account and the activity of the account to the IRS for any person that presents a US passport.

If one had a hot account in Panama this new treaty is cause for some concern. The window is now open for disclosure. But those account holders really do not have much to worry about. The chances that the US will ‘Ask’ are low and Panama is still in ‘Don’t Tell’ mode.

Thanks for the half loaf Tim.