The Panamanian Association of Business Executives (Apede) criticized Parliament harshly for approving a bill that establishes new taxes to pay an increase to pensioners and retirees, and urged a veto from Panamanian President Juan Carlos Varela.
It is bill 631 approved on Wednesday by the unicameral National Assembly, with a large opposition majority, which establishes an increase of between 35 and 60 dollars in pensions that will be financed with new taxes, including a rate of 7 per cent to the remittances that are sent abroad.
Apede said on Friday it is "imprudent" that Parliament legislates on a subject "as relevant as the increase in the tax burden, excluding a consultation process or in-depth analysis that will determine the effects of these increases on the economy".
"The hasty way in which the bill was approved makes us reflect on whether the final objective of the deputies is only to recover the approval of the electorate before the imminent electoral process and their reelection aspirations," said the business association.
Panama will hold general elections in May 2019 and a civil society-driven campaign calling for the "non-re-election" of legislators has taken shape, at a time when Parliament is the target of criticism and investigations due to the opacity in financial management.
Apede said that the "repercussions of the bill can be devastating" for the Panamanian economy, "particularly in moments of a slowdown", which has been evidenced in the reduction to 4.5 percent in the forecast of the expansion of gross domestic product (GDP) this year, when at the beginning it was estimated at more than 5.6 percent.
The union felt that the entry into force of the law "will contribute to sharpening the slowdown by virtue of modifying the fundamental
provisions of the territorial system in fiscal matters, genesis of the attraction of foreign direct investment that has contributed considerably to the growth of the economy".
"Additionally, it deems any purchase of goods and services abroad more expensive, which according to the bill would be taxed in addition to the taxes currently applicable, punishing Panamanians and residents who send remittances for any reason abroad," said Apede.
It added that the union is "aware of the plight of many retirees" who lack enough money for a living, and that is why it has highlighted "the need to discuss the pension system as a whole" in search of a "long-term sustainable solution".
Another employer, the Chamber of Commerce, Industries and Agriculture of Panama (CCIAP), also urged on Thursday the presidential veto of the bill, and said that it should be considered "the in-depth analysis of the origin of the funds for the increase in pensions and retirements.
In addition to the remittance tax, the bill includes a 5 percent rate to the net annual profits of slot machines and betting centers in casinos and gambling halls.
Also the amount collected in the selective tax to beer consumption, a 20 percent rate goes to the Disability, Oldness and Death program of the Social Security Fund (CSS) that maintains the payment of the pensions to the retirees.
The increase foreseen in the law covers pensioners who charge pensions for amounts between 500 to 1,500 dollars per month. It establishes proportional increases of 35, 45 and 60 dollars monthly depending on the amount of pensions.