Chapman withdraws proposed ITBMS tax on digital services and sales

Panama's Minister of Economy and Finance, Felipe Chapman, has announced that a proposal to implement a 7% tax on digital sales and services will not be presented to the National Assembly. The decision follows significant public opposition and widespread questioning of the initiative. Chapman stated that the government has listened to the concerns of Panamanians and is currently analyzing the proposal, confirming that there are no short-term plans to introduce it.

The minister explained that the proposal was withdrawn after he spent the weekend reviewing the various opinions it generated. He emphasized that the government must still evaluate measures to reduce tax evasion and increase revenue collection, acknowledging this as a legitimate demand from the public. The proposed tax on digital services was intended as a replacement for the Transfer Tax on Real Estate (ITBI) on properties valued up to $120,000, which is set to be eliminated.

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This bill has not been presented to the National Assembly. We have listened to Panamanians, we are analyzing it. At this time, it will not be presented, there are no plans to present it in the short term.

Initially approved by the Cabinet Council on August 17, the initiative faced considerable backlash. Opposition lawmakers argued that in a context of rising informal work, the measure would disproportionately affect middle and lower-middle-income citizens. These opponents also urged the Minister of Economy and Finance to focus on combating tax evasion, which results in millions of dollars in lost revenue for the state, rather than introducing new taxes.

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We will have to evaluate measures to 'reduce evasion and increase collection,' which is a legitimate demand from Panamanians.