News

By Lucio H. Mora H.

Panama City - Republic of Panama. The implementation of electronic invoicing has become a highly relevant topic for the public administrations responsible for tax collection and for citizens in general. This system, which seeks to digitalize and optimize processes related to invoicing, represents a significant step forward toward more efficient and transparent fiscal management.

Advantages for Public Administrations

• Greater transparency and fiscal control: Electronic invoicing allows tax authorities to monitor commercial transactions in real-time, significantly reducing tax evasion and strengthening compliance control.

• Resource optimization: By digitalizing the invoicing process, administrations reduce costs associated with handling physical documents, such as storage, transportation, and processing.

• Faster revenue collection: This system facilitates the identification of inconsistencies in tax declarations, improving efficiency in tax collection and reducing audit times.

Advantages for Citizens

Simplified processes: Electronic invoicing automates the invoicing process, saving time and eliminating the need for manual procedures.

• Cost reduction: Citizens and businesses can minimize expenses on paper, printing, and document storage.

• Digital access to tax information: Users can easily access their invoices, making it easier to organize their tax obligations.

Disadvantages and Challenges

For Public Administrations:

• Significant initial investment: Implementing electronic invoicing systems requires considerable investment in technology infrastructure, staff training, and platform development.

• Technological adaptation: The need to constantly update systems to ensure security and compatibility with new regulations presents an ongoing challenge.

For Citizens:

• Digital divide: Those with limited access to digital tools or technical knowledge may face difficulties adapting to the new system.

• Cybersecurity risks: The digitalization of invoices increases the risk of potential data breaches, requiring strict data protection measures.

Conclusion

Electronic invoicing is a powerful tool for transforming the relationship between public administrations and citizens in the fiscal realm. While it presents challenges in its implementation, its advantages in terms of transparency, efficiency, and accessibility far outweigh the difficulties. The key to success lies in collaboration between the public and private sectors, as well as promoting digital inclusion to ensure that the benefits of this system reach everyone.

By J.D. Lucio H. Mora H.

Panama City - Republic of Panama. The Supreme Court of Justice of Panama issued a historic ruling yesterday, reaffirming that accountants, as liberal professionals, are not required to pay taxes on their professional activities. This decision is based on the interpretation of the second paragraph of Article 40 of the Political Constitution of the Republic of Panama.

The ruling responds to a constitutional challenge filed by several accounting associations, which argued that recent tax reforms aiming to tax the income of professionals in the field contravened the country's Magna Carta. The Court, in its ruling, held that Article 40 of the Constitution provides special protection for liberal professions, including accounting, exempting them from the obligation to pay taxes for the services they provide independently, as well as the legal obligation to use electronic invoicing for any collection purposes.

The second paragraph of Article 40 states that "liberal professions, in terms of their individual and personal practice, shall not be subject to the payment of taxes or duties." Based on this provision, the Court concluded that any attempt to tax accountants would violate the principle of equality and the free professional practice enshrined in the Constitution.

The ruling has generated a wave of reactions in the country. While accounting associations celebrate the decision as a victory for the defense of professional rights, other sectors have expressed concern about the impact this tax exemption could have on public finances.

The Ministry of Economy and Finance has announced that it is studying the implications of the ruling and does not rule out proposing a constitutional reform to eliminate what they consider an "unjustified privilege" for accountants. For its part, the National Assembly has called a series of public hearings to discuss the issue and evaluate possible legislative actions.

This ruling sets a key precedent for other liberal professions in Panama, which could benefit from the Court’s interpretation, opening the door to future lawsuits and modifications in the country’s tax regime.

Unfortunately, this is the result of a poor legal interpretation by the previous government and the fiscal authorities at the time, as it has become entrenched in Panama due to a lack of understanding of the hierarchy of laws. There are administrative officials who attempt to legislate from their desks, issuing decrees or administrative resolutions that are openly contrary to constitutional guarantees. This is reminiscent of the bizarre Law-Contract signed for the Donoso Mine, and sadly, none of the hundreds of accountants in Panama’s public institutions have pointed out the errors that can occur when ignorance and folly prevail.

If it is necessary to reform the constitution to correct, add, or remove guarantees and citizens' rights, it should certainly be done, but under the rule of law and through the appropriate channels for such purposes. This is not a call to disobey the laws or seek particular privileges only in our sector, but rather a shout to prevent things that are incorrect for any citizen, including those graduated in liberal professions.

In the early months of President Mulino's administration, the Ministry of Economy and Finance (MEF) and the General Directorate of Revenues (DGI) have reported a notable increase in tax collection. This rise is attributed to a combination of effective fiscal enforcement strategies and a renewed focus on optimizing tax collection processes.

Since the start of the term, the MEF and DGI have implemented measures including modernizing payment platforms, enhancing fiscal audit efficiency, and launching educational campaigns to raise awareness about the importance of tax compliance. These actions have led to a significant increase in state revenue, enabling the government to invest in key projects for national development.

President José Raúl Mulino has emphasized the importance of a strong fiscal administration as a cornerstone for sustainable economic growth, ensuring that these resources will be used to improve infrastructure, education, and public services for the benefit of all citizens.

This increase in collection reflects the new government’s commitment to transparency and efficiency in public resource management, laying a solid foundation for fulfilling campaign promises and building a more prosperous country.