An email in over the weekend from a long-standing client caused me to revisit that familiar theme, “which jurisdiction is best?” I had recommended to him a Panama offshore structure but to do the banking in Andorra. He wrote me:
From my reading about it, having a bank account in Panama is more reputable.
Now, it’s very clear that the client has been looking at the website panamalaw.org. I’m familiar with this law firm, run by an aggressive young lawyer in Panama City (nothing wrong with that so far.)
But on their website they go on to trash a whole chain of competitive jurisdictions, including Andorra. That’s just not cricket!
Besides conveniently providing a list of hotels for anyone interested in visiting Andorra, the Panama Law website makes some comments which are at least highly negligent. For example:
The Bad – Andorra having sold out entered into tax information exchange agreements (TIEA) with the EU on tax matters. This is the European Union Withholding Tax Treaty. This is supposed to only apply to fraud pertaining to savings account interest paid in Andorra but it seems it could apply to tax fraud pertaining to this savings account interest income received by someone from other than EU countries.
What a load of bunk. It shows they clearly don’t have even the most basic understanding of the European Union Savings Tax Directive. (Those of you interested may find a decent article about the said directive here: http://www.lowtax.net/specials/std.html) It is not about tax investigations. It is about routine reporting of tax information and anyone taking time to read the treaty will see that Andorra did not sign up for the information exchange part.
Panama Law goes on to say:
A EU government could always say your name or your corporate name came up in an investigation involving an EU person or entity and we do not know how much time and energy Andorra would put into questioning the request or if they would just honor it. It would be up to an Andorra Judge and does that make you feel safe and secure at night when your privacy is at stake…
Well, er, actually yes! One hopes it never comes to that. But take this from somebody who has slept soundly many nights in both those countries, as well as choosing them both to do business on a regular basis. At the end of the day, I would trust and Andorran judge much more than a Panamanian judge. Andorra is one of the few countries with bank secrecy written into its constitution. Panama: well bank secrecy is fine as far as it goes but wasn’t it just last year, PanamaLaw, in a case involving HSBC Bank that the Foundation’s supposedly unbreakable corporate veil was pierced by a Panamanian judge?
Plus, if you happen to be American, as this client was… the US is known to have much more influence in Panama than in Andorra.
At the end of the day, we have to remember Andorra is a first world country with hundreds of years of tradition of respect for law, private property, and business confidentiality. Panama is still a third world republic which, er, produces bananas!
But there’s more. Not just the bad but…
The Worst - Andorra has been blacklisted by the OECD. This is a private agency like FATF in a sense and being black listed by them for failure to cooperate is going to make using their corporations and banks difficult if not impossible and of course will raise all sorts of red flags.
Just in passing Panama has no tax treaties at all of any sort or format, this is exactly what one should look for in an offshore jurisdiction. Panama has 150 large multi-national banks. Panama banks, hotels, corporations, etc speak English.
Regarding the OECD blacklistsing, well, we might wonder why the OECD blacklisted Andorrra. Would it be for non-cooperation with other countries in tax matters by any chance? Just what they were accusing Andorra of doing a few lines up the page? No-one ever recommended using Andorran corporations (I agree their use in tax planning is almost impossible) but that’s no reason not to use their excellent banks.
Oh, and Andorra doesn’t have any tax treaties either. It also has some banks and hotels and maybe even corporations where English is spoken!
That’s not to say Panama is insecure. Panamanian law is great and much of what Messrs Panama Law writes makes good sense. As I said, I choose Panama as the base for a lot of business.
But I always people in my presentations to “beware of biased advisors at home and abroad.” Panama Law appears to be the classic example of the latter. Instead of trying to understand what each individual jurisdiction can bring to the privacy planning table, they go out and push their own jurisdiction when it really might not be the best for the client.