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Panama Revenues
In the first half of the twentieth century, Panama's tax base
was narrow, and taxes were regressive. Up to 40 percent of the
urban work force was employed in the Canal Zone (including most of
those with higher wages) where, because of treaty arrangements,
their incomes could not be taxed by Panama. The rural population
was largely untaxed because of farming's subsistence nature and the
high costs of collecting rural taxes. Before the 1940s, over half
of the taxes were from imports, mainly consumption goods for
urbanites.
A 1955 treaty revision substantially expanded government
revenue sources. The treaty permitted taxation of Panamanians
working in the Canal Zone; it increased wage scales for those
workers. A major tax reform, undertaken in 1964, made individual
and corporate income taxes more progressive and improved the
procedures for tax collection. By 1968, the tax structure compared
favorably with that of other developing countries. Nearly half the
tax revenues came from taxes on income and wealth; import duties
and excise taxes on nonessential commodities provided an additional
15 percent of tax revenues.
The structure of government current revenue changed in 1979
because of the implementation of the Panama Canal treaties. Total
revenue increased from US$477 million in 1979 to US$986 million in
1985. Direct taxation grew as a share of revenue, from 45.2 percent
in 1979 to 52.6 percent in 1985. Tax receipts (direct and indirect
taxation), as a share of revenue, dropped from 84.9 percent in 1979
to 69.8 percent in 1985. The drop was brought about primarily by
the rise in the annual income received from operating the canal,
which accounted for about 40 percent of non-tax revenue in 1985.
Other sources of non-tax revenue included royalties and taxes from
the trans-isthmian oil pipeline, and levies on gambling.
Data as of December 1987
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