Panama sets seven day ultimatum in tax haven dispute with Colombia

PANAMA CITY (Reuters) - Panama set a seven day ultimatum on Tuesday for Colombia to remove it from a list of tax havens or face possible retaliation, the latest twist in a diplomatic dispute between the two neighbours that could deter investment in Panama. The Colombian government is trying to curb tax evasion and aims to pressure Panama to sign a financial information-sharing agreement. But the move could push Colombian investors to pull out of Panama, since assets in declared tax havens are taxed at three times the rate of foreign assets in countries that share data with Colombia. "If Panama is not given equal conditions once the seven-day period is over, Panama would be obligated to include Colombia on its list of countries that discriminate against Panama," Vice President and Foreign Minister Isabel De Saint Malo told reporters. She said the ultimatum is intended to give more space for a "friendly" diplomatic solution but added that the decision could trigger retaliatory measures, though she did not specify the measures. The ultimatum will expire on Oct. 21. But before that a bilateral meeting between De Saint Mello, Colombian Foreign Minister Maria Angela Holguin as well as the head of the South American country's tax and customs agency DIAN is scheduled for Oct. 17. Colombian investments in Panama, Central America's biggest economy, more than quadrupled last year to $3.2 billion and represented 41.8 percent of total foreign investments by Colombians in 2013, according to central bank figures. Colombia's finance ministry has said the decision to add Panama to the tax haven list will be reversed if a financial information-sharing deal is signed. (Reporting by Eli Moreno; Writing by David Alire Garcia; Editing by Ken Wills)