March 1, 2006
Torrijos out looking for budget cuts.Despite a legislative majority, the administration of Panamanian President Martín Torrijos faced some daunting hurdles in passing its reform proposals, including labor strikes and protests from business groups. Opening a national dialogue on social security reform and establishing talks with business leaders on the new tax regime helped ease tensions.
Although legislators approved a reform of the tax system in February 2005, final terms were not settled until nine months later, when officials incorporated private sector recommendations into the new law, known as the Fiscal Equity Law or Law 6. Acknowledging that a new 1.4% corporate sales
Controversial reform legislation is helping shore up Panama's finances. The fiscal deficit, however, remains as serious a problem as ever.