Panama Papers Worrisome For Expats

The tax collectors all over the world are getting just too damn clever

Over the course of the past few weeks we have added new words to the lexicon: Panama Papers. That refers to millions of documents leaked from a Panama law firm.  They suggest that hundreds, and possibly thousands had, through intricate networks of business entities, succeeded in concealing the location, origin and ownership of a massive amount of assets —worth billions of dollars—- out of the reach of tax collectors for countries all over the world. What does this mean for you? For Mexico? And are you the last person on the planet not using your share of tax loop holes?

The roster of folks involved is interesting because of their collective high profile.  The Icelandic prime minister stepped down as angry constituents let him know their feelings about his hiding money from their government tax collectors.

What of the collateral consequences the Panama Papers will have on Mr. or Mrs. Ordinary Expat… folks like you and I?

No U.S. expat worth his or her salt ignores U.S. Treasury efforts to identify those who have unfulfilled fiscal obligations.  FATCA, initially seen by many as overreach by the U.S. in the fiscal sovereignty of other countries, began yielding results: prosecutions of individuals involved in schemes to conceal assets have resulted in scores of “voluntary” disclosures. You had better be one of those.

Little by little, other tax authorities began understanding that the American idea was one they could implement in their own way.  The Organization for Economic Co-Operation and Development has developed a common reporting standard for financial assets.  Member countries will begin cross reporting assets owned by nationals of member countries, adopting the spirit of FATCA if not its form.

The Panama Papers provide fuel to the fire in the war against undeclared income and assets, suggesting there is far more out there to be scooped up.  The low hanging fruit will go first.  What will happen when all those are taken into account?  Of course, hands are going to reach further and further up the tree.  Suddenly, the Ordinary Expat may look like a Mossack Fonseca client. (The name of the company that was first exposed by the Panama Papers).

Aristóteles Nuñez, head of the SAT, (the Mexican IRS), stated his agency has begun to look at the names connected to the Panama Papers, no doubt looking for Mexicans.. He allowed that offshore ownership of assets is not necessarily illegal, and I concur.  But back to the Ordinary Expat…could he or she expect a paradigm shift? Possibly.

We don’t know how much or how soon, but one thing is for certain: the Panama Papers may alter the prospects of increased fiscal vigilance worldwide, even if we are not prime ministers, rock stars or tycoons.

Orlando Gotay is a California licensed tax attorney (with a Master of Laws in Taxation) admitted to practice before the IRS, the U.S. Tax Court and other taxing agencies.  His love of things Mexican has led him to devote part of his practice to the tax matters of U.S. expats in Mexico.  He can be reached at