The Panama Canal will be modernized and expanded –a decision taken by Panamanians during a recent referendum. Interestingly, the voter turnout was one of the lowest in the nation’s history (little over 40% of two million voters) the "Yes" option won 78% of the vote, whereas the "No" vote captured 21%. Null votes accounted for less than 2%.

According to analysts, the lower turnout can be attributed to the Panamanians disappointment with the Martín Torrijos administration, especially after a number of major Social Security scandals.

Despite the turnout, most Panamanians agree that the expansion of the Canal was the best option for the country’s future. The Panama Canal, one of the strongest pillars of the nation’s economy, is almost 100 years old, and experts believe it’s about to reach maximum capacity before 2012.

Among the promises by those supporting the “yes” option is the creation of thousands of new jobs, as hundreds of Panamanians were enrolling trade schools in order to aspire for a job in the expansion project. Those that voted against the project cited reasons such as a possible increase of the national debt and lack of options besides a simple "yes" or "no".

Local and international economists were stating that the project could cost at least US$ 1billion more than the expected US$5.2 billion presented by the Board of Directors of the Panama Canal Authority.

On October 6, 2006, the Treasury Department and IRS issued Notice 2006-87, which permits individuals who work outside the United States and live in foreign countries with high housing costs to deduct or exclude a greater portion of their housing costs.

U.S. citizens and residents are generally subject to U.S. tax on their worldwide income, but section 911 of the Internal Revenue Code permits individuals who live and work outside the United States to exclude from U.S. tax portions of their earned income and housing costs.

Citing the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), which gave authority to the U.S. Treasury Department in adjusting the amount U.S. citizens and residents living and working overseas could exclude and deduct from their worldwide income, the Notice lists the increases allotted to U.S. taxpayers for each city and region where the high cost of living deems it necessary to increase the threshold. This list will be updated each year.

The relief provided by the Notice is retroactive to the effective date of TIPRA. The Notice also requests comments regarding the determination of locations and housing costs in future taxable years.

With the current growth of the Colon Free Trade Zone and imminent expansion of the Canal (The Referendum was passed on the 22th of October 2006) in Panama’s future, an immediate demand for housing, rentals, and room and board will present itself in the Atlantic Port City of Colon and its surrounding areas.

The ACP (Panama Canal Authority) estimates that, during peak construction years, between 6,500 and 7,000 new jobs will be created, not including the indirect jobs produced by the construction sector boom and other related activities.

The Colon Free Trade Zone, which is situated at the Atlantic entrance of the canal, offers firms exemption from tax on all import and export movements. This generous tax regime has attracted around 1,750 merchants generating exports and re-exports estimated to be worth $11 billion per year.

[ View Details ]