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IMF calls Panama's 7% sales tax "very low"

The International Monetary Fund thinks Panama will need more tax revenue in the coming years, and it has put the 7% sales tax on the table. In the statement that closed its yearly review of Panama's economy, published on 7 October, IMF staff recommended widening the base of the ITBMS, Panama's value-added tax, cutting tax breaks that do not work and reviewing what they called the "very low statutory VAT rate", while protecting lower-income households from the effects (IMF). This is advice, not a bill. The government has not announced any change to the ITBMS.

What the IMF found

  • The mission, led by Naomi Griffin, worked in Panama from 23 September to 6 October (IMF, MEF).
  • The IMF expects the economy to grow about 5% in 2026, after 4.4% in 2025, and 4% to 5% a year over the medium term, helped by the Canal, more air connections, tourism and services (IMF, MEF).
  • Inflation should rise for a while to slightly above 2%, then settle back between 1% and 2% (IMF).
  • The public-sector deficit fell to 3.7% of GDP in 2025, under the 4% legal ceiling, and Panama is on track for this year's 3.5% limit. The IMF supports the goal of 3% in 2027 and 1.5% by 2030 (IMF, MEF).
  • Banks are well capitalised and profitable, but the IMF wants close watch on loans for construction, commercial property, preferential-rate housing and consumer credit (IMF).

The tax advice in plain terms

First, the IMF wants the tax authority to collect better what is already owed: modern systems, more audits, more use of third-party data and tighter control of invoices and tax credits (IMF). Later, it suggests a wider ITBMS base, fewer inefficient exemptions and a review of the rate, which Infobae notes is currently 7% (IMF, Infobae). It also says any extra income from the Canal should go to keeping debt down rather than to new spending (Infobae, Nexo).

Sales tax has already been a sore point this year. In August, Economy Minister Felipe Chapman said a plan to charge the 7% ITBMS on purchases and services from digital platforms would not be sent to the National Assembly in the short term, after public criticism (TVN, Telemetro).

Pensions and the EU list

The IMF says the 2025 reform of the Social Security Fund (CSS) covered the near-term funding gap, but further changes to pension parameters will be needed for the long run, based on the actuarial review the amended law provides for (IMF). It also says that leaving the EU list of non-cooperative tax jurisdictions would help foreign investment and lower compliance costs (IMF). EU finance ministers were expected to review that list on Friday 9 October in Luxembourg (La Estrella).

Update, 9 October: EU finance ministers removed Panama from the EU list of non-cooperative tax jurisdictions and moved it to Annex II, the list of cooperative jurisdictions that still have commitments to meet, while it waits for an in-depth review by the OECD's Global Forum on tax information exchange (Council of the EU).

What the statement is, and is not

The text is the IMF staff's concluding statement. Its report goes next to the IMF Executive Board, which issues the formal assessment (Nexo). The Ministry of Economy and Finance (MEF) welcomed the growth, deficit and banking findings in its own release, which did not mention the sales-tax advice (MEF).

What it means for expats

Nothing changes at the till today: the ITBMS stays at 7%. Over the next year, watch the 2027 budget debate and any revenue bill for changes to ITBMS exemptions or the rate, since a higher or wider sales tax would touch almost everything you buy. If you run a business or freelance in Panama, keep your electronic invoices in order, because the IMF's first request is tighter control of invoices and tax credits, not a new tax. The pension advice concerns the CSS system, not foreign pensions; if you pay into the CSS, keep an eye on the actuarial review. And if you have European banking or company ties, follow the EU list decision.

Sources

  • IMF - Staff concluding statement of the 2026 Article IV mission: growth about 5% in 2026, 4.4% in 2025; deficit 3.7% of GDP in 2025; broaden VAT base, rationalize tax expenditures, review the "very low statutory VAT rate"; further pension reforms; EU list exit would help FDI - 7 Oct 2026
  • MEF - Ministry release on the IMF mission: dates, growth outlook, deficit path, bank soundness - 8 Oct 2026
  • Infobae - IMF recommends a broader ITBMS base and a review of the 7% rate; Canal windfalls to limit borrowing; pension reforms - 8 Oct 2026 (10:31 Panama)
  • Nexo - IMF and World Bank forecasts; Canal income to reduce debt; report goes to the IMF Executive Board - 8 Oct 2026 (17:07 Panama)
  • TVN - Minister Chapman: no short-term plan to send the bill applying ITBMS to digital platforms - 24 Aug 2026
  • Telemetro - Chapman on the 7% ITBMS on digital purchases and services - 24 Aug 2026
  • La Estrella - EU finance ministers to weigh Panama's removal from the tax list on Friday 9 October in Luxembourg - 5 Oct 2026 (16:10 Panama)
  • Council of the EU - Conclusions of 9 October 2026: Panama absent from Annex I, listed in Annex II as waiting for a Global Forum in-depth review - 9 Oct 2026
  • La Prensa - Panama leaves the EU blacklist and moves to Annex II pending the Global Forum review - 9 Oct 2026