Venezuelan Oil Taxes to Reach up to 95%

April 26, 2011 Taxation in Venezuela

Venezuelan Oil TaxIn the face of rising political turmoil in the Middle East, the price of oil has been rocketing upwards, and the President of Venezuela Hugo Chavez is stepping forward to take advantage of the situation by raising the windfall tax on oil exports.

Over the weekend Hugo Chavez made an on-air phone call to a national political show, broadcast on Venezuelan television, in which he announced that a new regulation would be passed to significantly hike the windfall tax on oil exported from the country. The raised rates will be instated by presidential decree, and will not need the approval of Congress, as Hugo Chavez was granted special enabling powers by the National Assembly of Venezuela in December 2010.

Venezuela is a member of the Organization of the Petroleum Exporting Countries (OPEC) and South America’s largest oil producer, with a daily output of approximately 2.8 billion barrels. Currently, oil extraction companies are charged a 50 percent marginal tax on the revenues garnered from the sale of crude oil exceeding USD 70 per barrel, and a 60 percent tax when prices rise above USD 100 per barrel. After the new regulations come into effect, oil prices exceeding USD 70 per barrel will attract a marginal rate of 80 percent. Prices between USD 90 and USD 100 will be taxed at 90 percent, and USD 100 and above will see a tax of 95 percent.

Revenues raised from the windfall tax will be deposited into Venezuela’s National Development Fund, which is aimed at supporting and maintaining the country’s social development and expansion projects. During his interview, the President made the routine suggestion that the tax will ensure that a larger portion of revenues from oil extraction operations will be kept for the benefit of the people of Venezuela.

Photo by ¡Que comunismo!