The tax reform the Ricardo Martinelli administration hopes will be approved by a special session of the National Assembly includes provisions to change the income tax system in Panama to a new flat tax,
that according to authorities of the Ministry of Economy and Finance, would represent a modernization of the tax system. Deputy Finance Minister, Dulcidio Guard, said the goal of the reform is to simplify the tax administration with a single income tax, with a low rate for both individuals and businesses. This system is used in 25 countries, including Hong Kong, Ireland, Singapore, Russia and most Eastern European countries. Vice Minister de la Guardia added that they are also reviewing the Alternative Calculation of Income Tax (CAIR), and that this second package of tax reforms adopted just four months after the first tax changes, seeks to improve the process of paying taxes. Adolfo Linares, president of the Chamber of Commerce, described the change to a flat tax system as positive, as long as the rate cut results in a reduction of the taxes paid by individuals and businesses. (Editor's Comment: Simple is almost always better when it comes to tax structures. More people end up paying and complying with the law, and therefore you can reduce the rates for everyone. And since everyone is paying the same rate it's perceived as being very fair across the board. This move should result in an overall increase in government revenue, greater general compliance and participation, and a minor tax reduction for everyone. The increased revenues will come from more people being forced to comply. Revenues increase as the population grows and the economy expands.)  
By XENIA DE LEON for La Prensa

SOURCE: www.panama-guide.com