Revised and updated.
According to Senator Bernie Sanders, the agreement restricted the right of the United States to crack down on abusive tax havens.
Sanders voted against the agreement. Senator Hillary Clinton voted for it. Ted Cruz wasn’t yet a member of the Senate at the time.
Tax havens were a serious concern even before the trade agreement was signed, and the concern went far beyond Panama. Still, the agreement with Panama didn’t help.
As the chart above shows, the Panamanian law firm Mossack Fonseca registered most of its shell companies in countries other than Panama. Keep in mind that Mossack Fonseca is not the only law firm that registers shell companies in tax havens. It is not even the largest such firm in Panama.
Here is what Sanders said about the free trade agreement.
Panama’s entire annual economic output is only $26.7 billion a year, or about two-tenths of one percent of the U.S. economy. No-one can legitimately make the claim that approving this free trade agreement will significantly increase American jobs.
Then, why would we be considering a stand-alone free trade agreement with this country?
Well, it turns out that Panama is a world leader when it comes to allowing wealthy Americans and large corporations to evade U.S. taxes by stashing their cash in off-shore tax havens. And, the Panama Free Trade Agreement would make this bad situation much worse.
Each and every year, the wealthy and large corporations evade $100 billion in U.S. taxes through abusive and illegal offshore tax havens in Panama and other countries.
According to Citizens for Tax Justice, “A tax haven . . . has one of three characteristics: It has no income tax or a very low-rate income tax; it has bank secrecy laws; and it has a history of non-cooperation with other countries on exchanging information about tax matters. Panama has all three of those. … They’re probably the worst.”
Mr. President, the trade agreement with Panama would effectively bar the U.S. from cracking down on illegal and abusive offshore tax havens in Panama. In fact, combating tax haven abuse in Panama would be a violation of this free trade agreement, exposing the U.S. to fines from international authorities.
In 2008, the Government Accountability Office said that 17 of the 100 largest American companies were operating a total of 42 subsidiaries in Panama. This free trade agreement would make it easier for the wealthy and large corporations to avoid paying U.S. taxes and it must be defeated. At a time when we have a record-breaking $14.7 trillion national debt and an unsustainable federal deficit, the last thing that we should be doing is making it easier for the wealthiest people and most profitable corporations in this country to avoid paying their fair share in taxes by setting-up offshore tax havens in Panama.
Adding insult to injury, Mr. President, the Panama FTA would require the United States to waive Buy America requirements for procurement bids from thousands of foreign firms, including many Chinese firms, incorporated in this major tax haven. That may make sense to China, it does not make sense to me.
Finally, Panama is also listed by the State Department as a major venue for Mexican and Colombian drug cartel money laundering. Should we be rewarding this country with a free trade agreement? I think the answer should be a resounding no.
The Panama Papers Leak by Ian Welsh.
5 Key Points About the Panama Papers—And 4 About Tax Havens by teleSUR English. Good background on the United States, Panama and tax havens.
Mossack Fonseca – “Unprecedented Leak” Exposes the Criminal Financial Dealings of Some of the World’s Wealthiest People by Infinite Unknown. A good summary of the essential facts.