What's New
President-elect Donald Trump has started a quarrel with Panama over the fees it's charging American ships to use the Panama Canal, while the Trump Organization is fighting a court case over taxes in the central American country.
What to Know
In June 2019, the owners of a Panama City hotel that was managed by Trump's businesses, and carried the Trump brand, accused two companies, Trump Panama Hotel Management LLC and and Trump International Hotels Management LLC, of not paying taxes on their Panamanian earnings.
In a filing to the U.S. district court in New York, private equity manager Orestes Fintiklis and his company, Ithaca Capital Partners, alleged that the Trump businesses failed to pay 12.5% taxes on the millions of dollars they earned from managing the Panama City hotel. They also alleged that the Trump units failed to correctly report the number of people the hotel employed so that he could avoid Panamanian social security payments.
The filing documented how the Panamanian government later conducted a tax audit on the hotel and found major irregularities. Fintiklis and his company were forced to pay the money Trump owed, the court filing alleged.
In an updated complaint filed in the same court on March 30, 2020, Fintiklis' attorneys complained that "had Trump been honest with Ithaca about its failure to pay taxes on the management fees it earned and its failure to properly report employee salaries to Panama's social security agency, Ithaca would have never entered into the [licensing deal] because, among other things, (i) Ithaca would have recognized the significant, multi-million dollar tax penalty that could be imposed by the Panamanian government once it started auditing the Hotel; and (ii) Ithaca would have known that the representations made by Trump described above were false in that the Hotel was suffering from significant financial irregularities."
The litigation is still before the courts.
Newsweek sought comment on Monday from Fintiklis, Ithaca Capital Partners and the Trump Organization. Newsweek also contacted the Trump-Vance transition team and Panama's economy and finance ministry.
Why It Matters
The issue is important because Trump is potentially pushing the U.S towards conflict with Panama after accusing the country of financial wrongdoing.
Trump said on Sunday that the U.S. could demand the return of the Panama Canal if Panama doesn't reduce fees on U.S. goods passing through the canal.
The key waterway is crucial for the world's economy, linking the Atlantic and Pacific oceans.
"The fees being charged by Panama are ridiculous, especially knowing the extraordinary generosity that has been bestowed to Panama by the U.S. This complete 'rip-off' of our Country will immediately stop," Trump wrote on his social media site, Truth Social, on Sunday.
"The United States has a vested interest in the secure, efficient, and reliable operation of the Panama Canal, and that was always understood. We would and will NEVER let it fall into the wrong hands! It was not given for the benefit of others, but merely as a token of cooperation with us and Panama," he wrote.
Panama's president, José Raúl Mulino, replied with a video posted on X: "Every square meter of the Panama Canal and its adjacent areas belong to Panama and will continue belonging to Panama."
Trump replied on Truth Social: "We'll see about that."
What People Are Saying
Ana Navarro Flores, a prominent Nicaraguan-American political strategist and commentator, suggested on X on Sunday that Trump is threatening to invade Panama because he still owes millions of dollars of taxes in the country.
"Now we know what the sudden threats against Panama and ownership of the Panama Canal are all about," she wrote, while linking to a 2019 ProPublica article about the hotel tax controversy.
There is currently no evidence that Trump's threats are in any way linked to the hotel court case and Trump and his representatives have not made any public statements linking the two issues.
What Happens Next
Trump is unlikely to win a dispute over the canal by invoking international law. The U.S. transferred control of the canal to Panama in 1999 as a result of a 1979 treaty under President Jimmy Carter, which Trump has denounced as "foolish."
Trump will be inaugurated on January 20 and he will then be commander in chief of the U.S. military.
Panama has vowed to defend its territory. International diplomacy will be needed if the situation is to be resolved.
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