Last night I got robbed.
Not in the literal sense of the word. There weren’t armed men in masks holding me up on the sidewalk in Panama City.
(I’ve been coming here for 13 years and have never once felt unsafe…)
It was at the cashier’s cage at the Veneto Casino.
After a few hours with a friend at the roulette table where I was happy to have walked away at breakeven, I was shocked to find out that the government of Panama takes a 5.5% tax when you cash in your chips.
In other words, if you cash in $100 in chips, you receive $94.50 back.
I had no idea. And I was furious.
This really drives home a major misconception about Panama. The country is being paraded around the mainstream media right now, with protestors ignorantly mocking Panama’s ‘zero-tax’ regime.
Most of these people have no idea what they’re talking about. This casino tax is one of Panama’s many taxes.
They have transfer taxes and dividend taxes and stamp taxes and individual income taxes.
Most ironically, the Panamanian corporate tax rate is 25%.
That’s higher than socialist DENMARK, as well as the United Kingdom (which is supposedly leading the charge against global tax havens.)
The primary difference is that Panama has what’s called a territorial tax system.
This means that the Panamanian government taxes its residents only on income that’s earned within Panama.
So, if you’re running a hotdog stand on the sidewalk in Panama City, you’re going to be taxed.
And whoever owns the amazing speakeasy I went to last night will be taxed on the food and beverage sales from our dinner.
But if you live in Panama and generate your income from overseas, that money is NOT taxed by the Panamanian government.
It’s pretty simple. And sensible.
Think about it—why would any government think they have a claim to tax income earned overseas, especially when that income has already been taxed by a foreign government?
If you live in Panama and trade stocks in Germany, you’re already paying steep taxes to the German government.
What sense would it make for the Panamanian government to tax that same income a second time?
Panama’s tax system is a much more practical model for the 21st century than the way that most other governments tax their residents.
Most countries have worldwide taxes, whereby residents are taxed on every penny they earn around the world.
So if you are a Canadian tax resident but earn all your money in Ireland, the Canadian government will tax you on that income, even though the source of revenue has absolutely nothing to do with Canada.
Worldwide taxation is practically feudal.
It presumes we’re all medieval serfs tied to the land rather than intelligent professionals who can do business in a highly connected world.
And it’s absurd that this system of worldwide taxation is still so prevalent in 2016.