Argentina wins WTO appeal in case targeting Panama tax practices

GENEVA (Reuters) - The World Trade Organization’s appellate body on Thursday threw out a complaint from Panama about Argentina’s efforts to combat alleged tax evasion and avoidance.

A company list showing the Mossack Fonseca law firm is pictured on a sign at the Arango Orillac Building in Panama City in this April 3, 2016 file photo. REUTERS/Carlos Jasso/Files

The case brought by Panama, now under global scrutiny because of a huge leak of secretive offshore accounts data from Panama-based law firm Mossack Fonseca, was the first WTO row over steps taken against “harmful tax practices”.

Panama accused Argentina of discriminating against suppliers of financial services based in “countries not cooperating for tax purposes”, and it won a partial victory in a ruling last September.

WTO member countries are not allowed to discriminate between suppliers from different suppliers. But Panama said in 2012 that Argentina discriminated in eight ways against countries, including itself, that did not exchange information with Argentine authorities for the purposes of fiscal transparency.

Argentina countered that its measures were in line with recommendations by the OECD and the Financial Action Task Force, which combats money laundering and terrorist financing.

The appeal ruling found Argentina’s measures did not break WTO rules. But it did not go so far as to say Argentina was definitely within WTO rules, either. Instead, it decided there had been insufficient analysis of Panama’s original complaint, leaving the way open for similar disputes in future.

However, the Appellate Body did rule that countries could restrict trade with tax havens for “prudential” reasons or to comply with national laws, as long as they did so in a consistent and non-arbitrary manner.

Panama brought the WTO action when it was on Argentina’s list of countries that did not cooperate with tax investigations, though it was later listed as cooperative.

Part of its complaint was that Argentina was inconsistent, listing countries such as Cyprus, Gibraltar and Hong Kong as non-cooperative even though they had begun negotiations on an agreement on an exchange of tax information.

Argentina also listed as “cooperative” countries such as Luxembourg and the British Virgin Islands, which did not at the time meet basic OECD basic standards on tax transparency and information exchange.

Reporting by Tom Miles; Editing by Mark Heinrich