Is Panama, as a member of the OECD, in the process of reforming its tax system?

The signing of the memorandum of understanding between the Republic of Panama and the Organization for Economic Cooperation and Development (OECD) marks a milestone in the country’s institutional framework. With this step, the nation is taking decisive strides toward designing better public policies that lay the groundwork for inclusive economic growth. This initiative seeks not only to improve financial indicators but also to raise the quality of education, strengthen climate action, and firmly combat international tax evasion.

To achieve this goal, Panama will actively participate in programs, evaluations, and technical reviews, adopting global standards that will lead the country toward full membership. This process is key to setting the nation on a path of sustainable and equitable growth that translates into job creation and a substantial improvement in the quality of life for its citizens.

Within this framework, the Ministry of Economy and Finance (MEF) will lead the strategic approach, assuming technical coordination of all relevant government agencies. In this cross-cutting effort, the MEF will work closely with the Ministry of Foreign Affairs to ensure that the transition is consistent with the State’s foreign policy.

To this end, the Executive Branch has established the High-Level Ministerial Committee, the body responsible for overseeing the implementation of all actions arising from this process. The Committee is composed of the heads of the Ministry of Foreign Affairs and the Ministry of the Presidency, under the chairmanship and technical coordination of the MEF.

Within the framework of the reviews of the national tax system, it is important to consider the trends identified by the OECD’s Committee on Fiscal Affairs (CFA). These guidelines, which cover both direct and indirect taxation, not only impact tax collection efficiency but also define the State’s capacity to uphold the social contract.

Global tax trends driven by political, economic, and technological transformations are now setting the pace for current reforms. The digitization of the economy, coupled with growing public demand for transparency, will prompt the government to rethink the tax model to adapt it to the new taxation paradigms of the 21st century.

One of the key pillars of the roadmap will be the implementation of the Side-by-Side approach. This mechanism ensures the harmonized coexistence of the Global Minimum Tax (Pillar Two), which establishes an effective rate of 15% per jurisdiction for multinational groups with revenues exceeding 750 million euros. This measure, coordinated with transfer pricing reforms and the other pillars of the BEPS project, will transform the national tax system by integrating economic substance criteria into its structure.

The OECD’s assessment in its report Tax Statistics in Latin America and the Caribbean 2025 underscores the urgency of these changes. In Panama, the Income Tax on Salaried Employees is the largest component of tax revenue; however, the tax burden stands at 11.9% of GDP, a figure considerably lower than the regional average of 21.3% and the 33.9% of OECD member countries.

The OECD’s CFA recommendations are undoubtedly an essential benchmark for the country’s fiscal roadmap. However, the modernization of the tax system must be a process of strategic adaptation, not mere adoption. By aligning international standards with tax competitiveness in a fragmented world, Panama ensures not only compliance with its global commitments but also the architecture of a robust, fair, and, above all, inclusive-growth-oriented tax system.

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