Panama insists it's not a tax haven amid strained diplomatic relations

The president of Panama has spoken out against France’s decision to put Panama back on its tax haven blacklist, calling the move “wrong and unnecessary.”

Following the Panama Papers leak, which has embarrassed a number of world leaders by revealing hidden offshore funds, France said it would reinstate Panama on its list of countries which are “uncooperative” in tax matters.

This means it will handle all transactions with Panama with suspicion, and presume tax fraud until proven otherwise.

President Juan Carlos Varela has promised to improve transparency in Panama, which he said is not a tax haven but “dignified, respectful and open to dialogue,” according to The Local.

Panama has been off the French blacklist since 2012, when the two countries signed an agreement on fighting tax evasion.

But the leak of more than 11 million documents from Panama law firm Mossack Fonseca has shone a light on alleged money laundering taking place in the central American state.

An official inquiry into the country’s financial practices has been announced by the Panamanian authorities.

However, Mossack Fonseca has yet to be approached by any investigators, according to Reuters.

“Every time there's something in the newspapers, the authorities announce they'll launch investigations. We're fully cooperating but we haven't been contacted by anyone yet,” Ramon Fonseca, the law firm’s founding partner, told German newspaper Bild.

Previously, the Panamanian government threatened retaliatory measures to France’s decision, such as blocking French investment and withholding public tenders.

In a phone call with French President Francois Hollande on Friday, Mr Varela changed his tone, emphasising his commitment to diplomacy and fighting corruption.

“The world needs multilateral cooperation from all countries to tackle global problems,“ Mr Varela told reporters.

Mr Fonseca has also revealed that the unprecedented data leak was not executed by a member of staff but was instead the result of a hack from an overseas computer.

He said that he knew which country the hack had come from, but could not disclose it, according to Reuters.

Mr Fonseca, who was a senior government official in Panama until March, said “thousands of lawyers around the world” were doing the same “completely legal” work as Mossack Fonseca, which specialises in setting up offshore companies.

Meanwhile, Mossack Fonseca’s offices in El Salvador have been raided by authorities and documents and computer equipment seized, officials have said.

The El Salvador atorney general’s office posted a document on Twitter which alleges that the El Salvador branch of Mossack Fonseca was used as a “back office” for the firm’s wealthy clients.

But the firm says that this information is being used out of context and has denied any wrongdoing.

The Panamanian finance minister, Dulcidio de la Guardia, will travel to Paris on Tuesday to stress that Panama is a country committed to fighting corruption.

French finance minister Michel Sapin has recommended that other rich countries follow suit, calling for members of the OECD to add Panama to their lists of countries who do not share tax information freely.

France has called an OECD meeting next Wednesday to work on “co-ordinated action by tax administrators” regarding Panama.

And Mr Hollande has urged Mr Varela to help French tax authorities with their enquiries following the leaks.

Other countries on the French tax evasion blacklist include Botswana, Guatemala and the Marshall Islands.