Panama warns France of diplomatic measures if it is not dropped from tax haven blacklist in wake of Panama Papers

President of Panama Juan Carlos Varela (right) makes a statement after France's decision to include Panama on a blacklist of countries.
President of Panama Juan Carlos Varela (right) makes a statement after France's decision to include Panama on a blacklist of countries. PHOTO: EPA

PANAMA CITY (AFP) - Panama warned France on Tuesday of unspecified "diplomatic measures" if it doesn't drop it from a blacklist of tax havens in the wake of the Panama Papers revelations.

"If France's government doesn't reconsider its position, Panama's government will find itself obliged to take diplomatic measures," President Juan Carlos Varela told reporters.

Following the Panama Papers reports showing how a Panama law firm helped wealthy people from France and other countries stash their assets in offshore companies, Paris last week put Panama back on its national list of Uncooperative States and Territories (ETNC), from which it had removed it in 2012.

France is also urging the European Union and all member states of the Organisation for Economic Cooperation and Development (OECD) to follow suit.

Such an international designation would deal a heavy blow to Panama's vital financial services sector, upon which the Panamanian government recently imposed reforms to move it towards global transparency standards.

Mr Varela said Panama was asking Paris "strongly and respectfully" to take back its "wrong and unnecessary" decision to blacklist his country. Such a designation entails financial sanctions such as heavy French withholding taxes on transactions.

Panama's laws also provide for retaliation in such cases that can lead to public tenders being withheld from companies from offending states.

Panama has mixed such threats with affirmations that it is open to discussing how to improve transparency, all in a bid to head off wider action against it.

The Panama Papers, centred on a huge cache of documents pilfered digitally from the law firm Mossack Fonseca, has had repercussions around the world.

Iceland's Prime Minister was forced to resign after his name appeared as one of the beneficiaries of an offshore company. Britain's Prime Minister has had to disclose his tax records.

Russian President Vladimir Putin has sought to divert attention from his entourage by claiming it is all a US plot against him.

China has been censoring online forums and media to try to prevent the names of relatives close to the leadership circulating.

And wealthy citizens in Australia, France, Spain, Mexico, Peru, India and elsewhere face probes over suspected tax avoidance after their names figured in some of the 11.5 million documents.