Memorandum by Mr. Murray M. Wise of the Division of Caribbean and Central American Affairs
Recently the Ministry of Finance and Treasury in Panama endeavored to impose taxation on employees of business firms in the Canal Zone which are branches of firms located in Panama. The Embassy lost no time in pointing out that it could not accept the viewpoint that Panama had fiscal jurisdiction in the Canal Zone, because Article III of the Treaty of 190357 granted to the United States all the rights, power and authority in the Canal Zone which the United States would possess and exercise if it were the sovereign of the territory, “to the entire exclusion of the exercise by the Republic of Panama of any such sovereign rights, power or authority”.
This subject is also one which the Panamanians bring up periodically. However, it is a satisfaction to note that on December 31, 1945 the Foreign Office instructed the Internal Revenue Section of the Ministry of Finance and Treasury to cease immediately sending letters [Page 1143] to American firms established in the Canal Zone requesting information as to their financial operations. Recently a question arose with Pan American Airways regarding the right of the Panamanian Government to tax laborers working for that organization in the Canal Zone. The Embassy pointed out that Panama has no type of residual jurisdiction in the Canal Zone.
- For text, see Department of State Treaty Series No. 431, or 33 Stat. (pt. 2) 2234.↩