Yesterday Luis Cucalón, Director of DGi, Panamá’s tax collecting authority, stated that the newly mandated fiscal printers will generate between $60 and $80 million in new collections of the national sales tax, ITBMS, in the 4th quarter of 2011 alone. Newspaper headlines today are shouting that the government will get $300 million dollars in new taxes.
The Director has reason to be optimistic. The DGi reported that in the First quarter of 2011, they collected $1.257 billion in taxes, $264 million more than in the same period of 2010. But those are ALL taxes, and annual income tax returns are filed in March every year. The government is already collecting in advance of any calculation of liability estimated taxes at the rate of 1% of Panama sales on a monthly basis. Perhaps he’s extrapolating from the 1% of income tax prepayments to project the volume of national sales, forgetting that small businesses with sales less than $36,000 don’t have any obligation to collect or remit ITBMS, but do have to file and pay income taxes, including the AMIR.
But let’s look at the math. The ITBMS is 7% levied on essentially all sales except food and pharmaceuticals. $60 is the ITBMS on an $857 sale. $80 is the tax on a $1,143 sale. So apparently DGi believes that the sales tax on between $857 million dollars and $1.143 Billion of sales are going uncollected in three months. The $300 million in new expected sales tax collections indicate that the government, or at least the Director of DGi, thinks there is at least $4.3 billion dollars of under reported sales subject to ITBMS a year in Panamá.
Businesses that do less than $36,000 in annual sales don’t have the obligation to collect and remit any ITBMS. Yet every business, large or small, regardless of their sales volume now must purchase one of these expensive fiscal printers to produce their customer invoices and receipts. These printers are being marketed at prices ranging between $1,000 and $2,000 and the purchaser must also enter into a monthly service agreement with the vendor to be available to solve any problems in the interface with the printers and the company’s accounting program. If a small business had purchased one of these expensive machines by 1 October, the government was offering up to $850 tax credit against the cost. But if a small business doesn’t have at least $5,700 in taxable income, the credit is of little economic benefit.
And you thought Panama was a tax haven? Think again.
DGi is very fond of multas, fines for failure to comply with their complex and frequently modified rules. The multa for failure to purchase one of these printers is a minimum of $1,000. DGi will periodically come and extract the data that these machines collect and enter that data into the DGi database. Starting now purchases made and recorded on invoices that are not produced on these printers will not be eligible for expense by the purchaser on their tax returns. DGi is training a cadre of auditors and has plans to eventually have one auditor for every 50 businesses in the country.
Cucalón adamantly claims that this is not a new tax on small business and boldly states that there will be NO more extensions of the phased implementation schedules.
Small business owners are already in the streets in Los Santos and Herrera. It remains to be seen how intransigent DGi will be as these rules become better understood and DGi begins to levy fines and station auditors outside mini-supers to check customer’s receipts as they have threatened to do. Peaceful street protests are a tradition in Panamá, and with good reason – they are often very effective ways to get politician’s attention – and changes often result.
If you are the owner of an entity that is operating a business in Panamá, be sure to contact your Panamanian accountant to learn if your business is one of the several exempted categories or if you must acquire one of these printers and comply with the new regulations. If your Spanish skills are adequate, you can go to the DGi webpage and read the rules and implementation schedule online at dgi.gob.pa. !Buena suerte!