The U.S. and Panama have concluded a Tax Information Exchange Agreement that is now in effect.  The agreement signed in 2010 requires the delivery of information to the requesting country in all tax matters relevant to applying and collecting taxes and investigating and prosecuting tax crimes whether or not the country receiving the request has a domestic interest in the matter and despite bank secrecy laws.  The agreement follows TIEAs also concluded in 2010 with Chile and Columbia.  The impetus for these and other such agreements between countries around the world was the promulgation by OECD (Organization for Economic Cooperation and Development ) of its black, gray and white lists which classify surveyed countries based on the degree to which the OECD’s anti-tax haven agenda is deemed to have been implemented.  The categories are:

• White: Countries that have substantially implemented the OECD model tax standard.  Implementation is deemed substantially achieved when agreements on 12 TIEAs have been achieved.
• Gray: Countries that have committed to but have not yet substantially implemented  the OECD standard.  The flurry of TIEAs has been motivated by countries politically seeking the while classification.
• Black: Countries that have not committed to the OECD standard and are deemed uncooperative tax havens.  Amazingly, the most recent progress report of OECD lists no country in this category which would justify possible sanctions. So, OECD would have us believe that tax havens, at least of the uncooperative sort, have closed up shop.
• Many countries are not listed in any category because they have not been surveyed.

With all of this information agreement activity one would think the world is a river of gorging information flowing like onrushing rapids. That may be true of Switzerland where a criminal indictment of UBS led to a speeded up process but South and Central America are still more swamp than river. There are only two full-blown double tax treaties in force between the U.S. and  Latin American countries: Mexico and Venezuela.  A Treaty was also signed with Argentina in 1981 but is not in force. The treaties with Mexico and Venezuela, like other income tax treaties, contain information sharing clauses (or, in the case of Mexico a related TIEA).   TIEAs have been concluded and are in force with a number of non-treaty countries, namely:

• Chile
• Panama 
• Columbia
• Costa Rica
• Guyana
• Peru
• Honduras
• Brazil

It remains to be seen how cooperative Venezuela will be or how much urgency other jurisdictions will show in attempting to comply with requests by the U.S. for information under a TIEA. Non treaty or TIEA Latin American countries present a Black Hole in the G-20’s (world’s major advanced and emerging economies) efforts to combat harmful tax practices.  The populist and socialist leanings of many Latin American countries are by intent or inadvertence causing more of their citizens to become U.S. tax residents.  The U.S. regimen of taxing world-wide income of residents will invariably conflict with long-held cultural beliefs of many in the region that candor towards government is foolhardy.  The IRS should consider a voluntary disclosure or amnesty program aimed specifically at Latin American’s who have become U.S. tax residents but may have not reported all income or all financial accounts maintained in home countries.

Copyright 2011 by Robert S. Steinberg, Esquire

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