The country has committed to cooperating with the international community on transparency.

Panama, which earlier this year was embroiled in a major tax scandal, yesterday signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, an instrument for boosting transparency and combating cross-border tax evasion.

The commitment comes months after 11.5 million documents – dubbed the "Panama Papers" – were leaked from Panamanian law firm Mossack Fonseca. Provided to the Washington DC-based International Consortium of Investigative Journalists, the documents contained information on more than 214,488 offshore entities. The leak threw into the spotlight issues such as the use and misuse of offshore structures and the need for legitimate client confidentiality. For an editorial comment on the scandal, click here.

“Panama’s decision to sign the multilateral Convention is a confirmation of its commitment to take the necessary steps to meet international expectations in the fight against tax evasion,” OECD secretary-general Angel Gurría said during a signing ceremony. 

“It also sends a clear signal that the international community is united in its efforts to stamp out offshore tax evasion. We will continue our efforts until there is nowhere left to hide.”

Panama is the 105th jurisdiction to sign the Convention, which was developed jointly by the OECD and the Council of Europe in 1988. The Convention provides for all forms of administrative assistance in tax matters: exchange of information on request, spontaneous exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection. It guarantees safeguards for the protection of taxpayers’ rights and allows automatic exchange of information on option.