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We had lunch in David on Saturday, we ate at the New China restaurant directly across from the Nissan dealer. We have eaten there before, they have a pretty good lunch that was $3.99 two weeks ago and is now $4.25. In addition to the price increase they have a new sign. I saw the same sign in Sugar and Spice today and I suspect we will see it all over Panama. The government believes businesses are cheating on their point of sale taxes and they have a new way to enforce compliance.
The summary of this new law is that you, the patron, has responsibility to ensure the restaurant provides you a printed receipt from a special cash register mandated by the government. These registers are designed so a government agent can come in a collect tax data automatically.
There have been protests by merchants nationally about the need to spend hundreds of dollars on these machines. The next round of protests might come from the price increases these are forcing on consumers from merchants who collected the taxes and in the past failed to report the revenue; those businesses just lost 7% of their income.
There might also be some consumer backlash to what the sign states. You, the consumer, need to have your receipt when you leave the restaurant. Amazingly if you are asked for your receipt and fail to produce it you will be fined one dollar or 7% of the value of the food you ate. This of course is absurd, but it is the new law.
When we paid our bill at New China, I asked for my receipt. The waitress was shocked, went back to the manager and returned to explain that they do not have the register to print the receipt that the sign requires me to have; viva Panama.
Do wonder who gets to keep the payment of the fines?
It is amazing the amount of business in Panama that openly told you if you wanted and invoice or not. If you say yes then they will charge you with the 7% of sales tax or ITBM. What was happening? Simply they were not reporting their real income and not paying the taxes they should be paying.
It is incredible that working people and medium class where paying more taxes than business, companies and corporations. About 20 years ago the Endara government did a “Fiscal Raffle”. This raffle worked that you have to collect 10 invoices and cash receipts and place in one envelop and send to the Minister of Treasury. At national TV they will draft some envelopes for cash prices.
This idea was to make all citizens to ask for the invoices when paying for products and/or services. The Tax Department or DGI picked at random some invoices and check the accounting records of those business to see if they have that sale registered accordingly in their accounting books and declared this income for taxes. This program lasted only one year and nothing have been done since that time.
Now with the use of this electronic equipment it will be difficult for the business to alter their accounting books for not declaring income. If the business does not provide you with the receipt or invoice they dont have that sale declared and are avoiding taxes. By forcing the customer to ask for the receipt they are forcing the business to use the equipment and register the income and the sales tax.
This is a sales tax and the business becomes only a collector of this tax. The customers and consumers are the one who are paying the taxes so there is no way that any business says that they have to increase their prices because of the equpment implementation is causing them extra cost. About the cost of the equipment, well I have seen equipment ranging from $400 to $900. The govenrment gave the business a refund on taxes for the 50% of the value of the equipment. I know that this equipment could be a large investment for a small Fonda selling Comida Tipica but there are ways to get the equipment without the need to increase their prices.
The problems is that we, panamanians, are not used to pay taxes. We are not used to a fiscal and tax discipline. Now we see at the local news that business are saying that they will have to increase their prices. What a shame. Most of them were charging us the 5% now 7% of sales tax but not reporting them to the DGI (our IRS) but keeping to themselves. But be aware that for sure the govenrment wont allow them to do that and even that there is not price regulations in Panama the Acodeco will do something about this.
Maybe the government could use some of the tax money to pay for firemen, paramedics and related equipment!!
Unfortunatelly it is being used to pay the wages and salaries of all the politicians in office in first place.
If I am approached by someone requesting to see my receipt, how do I know if that person is entitled to see it? And, if I don’t have it, I am required to give that person $1,,,,? I can imagine a line of “government employees” standing outside a restaurant, each demanding to see my meal receipt or hand over $1. This could get interesting!
Fran
Good question. First thing I will ask him to identify himself. I would like to know who he is and why should I show him the document requested. I guess that the only government officials that could request this information are from the DGI (Direccion General de Ingresos). They are like our IRS officials and this is the government agency to enforce this law. So beware of some “smart guys” that would like to take advantage of this. They should be clearly identified with their uniform and ID Cards from their agency.
No person from government could collect money from fines in the street. This is against the law. They should give you a subpoena to their office on working hours to pay the fine and they should handle a receipt or a prove of payment. I have not read this law yet but that is the normal procedure.
It is going to be very hard for the government to place people every where to enforce this law. I guess they will do some operations at random the first three months and later it will be forgotten. They would like that all consumers ask the business automatically the invoice or cash receipt. Their interest is to avoid that business dont declare the sales tax and if everybody ask for the receipt or invoice the transaction will be recorded on the electronic equpment.
I have talked to several merchants and the more popular black machines cost $1,400- plus $100- to program it plus $200- for a two year warranty. According to “LA PRENSA’ these machines can be bought in other countries up to 50% less than merchants in Panama are paying. A spokesman for the machine manufacturers stated that the reason for the increase in cost is that the Panamanian government requires a very expensive chip, which, seems to me, should be paid by the government.
$3.99 to $4.25 comes very close to 7% increase. Expect other merchants to follow.
Larson:
I have seen in the local newspaper new companies that have been approved by the DGI selling cheaper equipments, specially for small merchants, and giving longer finance payment terms. As a freelance professional I dont have to buy this machine but I have read all the controversy of the equipment and found those ads in the local newspaper. Even in LA PRENSA itself.
A Chinese ferreteria (hardware store) owner, friend of mine, told me that an obvious government inspector came to buy a pound of nails to see if the merchant would give a receipt. If he plays it right, after many hardware store check ups he could build his own home. (:o)
Larson:
As Lee told me in a post: “I am bitting my tongue”.
Most of the bad experiences I have had with merchants that no provide me invoices and/or receipts have been with those types of “hardware stores”. But I think that some merchants needed more fiscal and tax discipline and on the medium and large term things will improve for the government collecting taxes.
The problem is with the small merchants (think one person hair salons for example) who don’t even gross $36,000 per year and therefore don’t need to collect sales tax. These Mom and Pop operations have to spend $1000 + out of their very slim profit margin to buy a fancy machine that benefits neither them nor the government. Sigh . . . TIP . . . this is Panama where logic doesn’t apply.
Why don’t they fine the restaurant instead of the consumers? How would they know the person walking out was not just using the restroom or decided not to eat there after all? How can they fine you $1 or 7% if there is no proof (receipt) you had something to eat?
Penny, $36,000 a year in the U.S. may not be much, but in Panama it’s pretty decent money.
When I lived in Italy in ’95 and bought a pack of cigarettes, by law I had to keep my reciept for 50 mts after leaving the store. Italy and Panama have a lot in common. They pass many laws but never inforce them.