Reassessments Your taxes in Panama property taxes

Reassessments would especially affect absent landowners
by Eric Jackson

Private companies contracted by the government have been going around unannounced for more than two years to do real estate property tax reassessments of houses, condos, lots and businesses, mostly without ever entering onto the premises of the places they assess. At least 25 advertisement have been run in El Panama America only — of course: Ricardo Martinelli owns that paper — announcing series of property tax reassessments, listed by finca number rather than by the names of owners. Once such an announcement is published, the owner of a property has only 15 business days to appeal.

Minister of Economy and Finance Frank De Lima explains that Panama is “missing” more than $300 million per year in lost revenues because real estate has not been re-assessed in more than 20 years. At the present time, Panama takes in $130 million in property tax receipts. De Lima says that the figure must be $400 to $450 million. He reassures nervous middle class homeowners in this election year that the ministry is looking to get this extra money not from middle class areas or downscale places like San Miguelito, but from the upper-end Panama City neighborhoods like Paitilla, Punta Pacifica, La Cresta and Costa del Este, and from the beach communities between Punta Chame and Rio Hato. If he intends to nearly triple the national property tax revenues by raising the taxes on just these areas, it does not take very complicated math to notice that he is talking about far more than tripling the taxes on the areas selected. Some tax lawyers are estimating a seven-fold increase in the tax value of reassessed properties.

In September, however, notices were published about steep reassessments in the middle class area of Bethania and the corregimiento’s PRD representante, Iván Picota, cried foul. The Chamber of Commerce and the Panamanian Business Executives Association (APEDE) joined in the protest, arguing that for many middle class homeowners in places like Bethania, assessors based their valuation not on what anyone is paying for similar properties in the area but on what speculators predict the values would be if the homes are replaced by luxury condo developments. Driving property taxes above what current residents can afford to pay would be one way to compel the people in a neighborhood to sell to developers or speculators.

Out along the beaches of Panama Oeste and Cocle, the anecdotal reports are that the reassessments are especially starting with recently built areas and that a basic rule of thumb is that the value of any property from which the water can be seen starts at $300 per square meter. However, despite the construction boom in these areas there are very few sales at prices like those. The notorious crime wave is one factor, the flight of a sector of foreign residents who were hiding from their countries’ tax authorities and are now concerned about tax information sharing agreements and what is developing into a garden variety speculative bubble driven by money laundering far more than any herd mentality in the market mean that you can drive by the towers at Vista Mar (etc.) at night and see hardly any lights on.

Consider, however, what it means to the American who grew up in Panama, lives elsewhere but wants to retire here, and bought a lot in San Carlos within walking distance of the beach with plans to build. An announcement gets made in the fine print of a now little-read newspaper and within three weeks the property owner is stuck with a massive and unappealable property tax bill that she can’t afford to pay and bears little relationship to the value of what she owns. Either the government ends up grabbing the property for unpaid taxes or the owner is forced to sell to a speculator under disadvantageous conditions.

Consider also if you are a straightforward real estate developer planning to make money not from under-the-table payments by way of double billings of fronts for the likes of Polvos Farmaceuticos Colombianos but by building and selling homes near the beach. As the word gets out that your potential customers will have to pay sky-high real estate taxes either immediately or after a grace period (the old exemption on new construction is being phased out, and in any case it never applied to the value of the lot), there are going to be fewer buyers.

Major property tax increases less than a year before a national election? Yes, the guy ran for office in 2009 on a campaign platform of being crazy (“Los locos somos más”) but this is bound to be a hot button campaign issue. It is. Vice President Juan Carlos Varela, the Panameñista presidential candidate, let loose a blistering tirade against President Martinelli and Martinelli’s stand-in presidential candidate, JD Arias, “President Martinelli, with the complicit silence of his candidate José Domingo Arias, is seeking to increase the tax burden for Panamanian families,” Varela charged, adding that “he’s mis-spending millions in public funds that belong to all of the Panamanian people on excessive government television advertising for political purposes.”

What’s a president to do?

Martinelli sent out a Twitter tweet, announcing that he would have De Lima meet with unspecified different groups to review the reassessment process.

But does anyone who is not a bad guy — like a president buying government advertising in his own newspaper or a ruthless real estate speculator looking for government assistance to force people to sell their homes to him — gain from this? One might argue that with the extra revenue the Panamanian people will be able to afford more schools, wider roads, bigger prisons, more radar installations for the US War on Drugs or new special forces units to participate in Colombia’s civil conflicts. But aside the from the blessings of bigger government, some tax lawyers have carved a new niche out of the situation. If you want to check to see if your property has been reappraised and if there is time left to appeal: Advice Panama SA has set up a database and search engine for those who are not dutiful readers of Ricardo Martinelli’s broadsheet daily to be able to monitor the reassessment status of their properties. You can get there online at http://revalorizacioncatastral.com/.

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4 Responses to “Reassessments Your taxes in Panama property taxes”

  1. Linda says:

    I have thought about doing that but so far it hasn’t been nseecsary. But, maybe with these new circumstances I should consider it! My other daughter is in the process of graduating and moving for a new job so there is a lot going on in the family.

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