The European Union (EU) has labeled Panama and 16 other nations as tax havens in the bloc’s first-ever blacklist of countries that fail to meet transparency standards.
The 17 countries, which also include Bahrain, Barbados, South Korea, Mongolia and Tunisia, were named for failing to make a clear commitment to the EU to improve their banking and tax standards by the end of 2018.
In a statement issued by the EU on December 5 it said these countries ‘consistently refuse to play fair on tax matters.'
Explaining the decision to include Panama, the EU said that 'Panama has a harmful preferential tax regime and did not clearly commit to amending or abolishing it as requested [by the EU] by 31 December 2018.’
The EU defines a ‘harmful’ tax regime as a scheme that gives advantages to non-residents only and lacks transparency, among other factors. It said it will monitor Panama’s commitment to fixing those problems in the future.
The Central American country has been trying to rebuild its credibility after the Panama Papers scandal of 2016, which revealed how the wealthy hide their money in offshore shell companies and highlighted weaknesses in anti money-laundering controls.
Prior to the revelations, Panama's efforts to improve its image had borne fruit as in February 2016 it was announced it had been taken off the infamous 'grey list', an international money-laundering watch list run by inter-governmental watchdog the Financial Action Task Force.
This accomplishment was soon overshadowed as the Panama Papers scandal broke two months later, dealing a heavy blow to the country and its financial industry.
Work on compiling the EU's list started in September in 2016, when the European Commission pre-assessed more than 213 countries.
The EU made its final decision based on whether countries met international standards for information sharing and whether they had unusually low taxes, among other criteria.
It left out 47 countries from its list, including Uruguay, after they committed to improving their systems, and included the 17 jurisdictions which failed to do so. The EU plans to update the list once a year.
Its announcement comes after the release of the Paradise Papers, a wide-ranging investigation into the offshore holdings of some of the world's most powerful people and firms.