Venezuelan President Hugo Chavez ratcheted up an oil windfall tax in a move that raises government income ahead of a presidential election, but puts a heavy load on oil companies in the OPEC member state.
Chavez, who will seek re--election next year, predicted oil prices will keep rising and said extra income from new tax rates will be transferred to a development fund for social spending.
“The decree is to increase the fiscal contribution and the contribution of petroleum resources to development,” he said in a late night telephone call to a television chat show on Thursday, adding that the war in Libya was driving prices higher.
US oil futures settled at US$112.29 on Thursday, while Brent crude was US$123.99. US markets were closed on Friday for a holiday.
FAST-TRACKED
The new law was created under fast-track powers that allow the president to bypass the Venezuelan congress for several months and rule by decree.
Chavez first introduced a windfall tax in 2008 of up to 60 percent on revenues from oil prices higher than US$100 a barrel, based on the ideas of Nobel Prize winner Joseph Stiglitz. Under the new rules, the government will take as much as 95 percent.
South America’s biggest oil producer, Venezuela pumps almost 3 million barrels a day and has enjoyed sharply higher income from its main export in recent months.
Despite the rising prices, already large transfers to the government mean state oil company PDVSA suffers cashflow issues and its profits fell sharply last year. The original windfall tax kicked in when prices rose above US$70 a barrel in November last year.
Under the new decree, PDVSA and its foreign partners will have have to pay the government 80 percent of income from sales of oil at more than US$70 a barrel, rising to 90 percent when prices reach US$90 a barrel. All income from prices more tan US$100 per barrel will be taxed at 95 percent.
In 2008, companies complained the windfall measure was too harsh because it taxed gross income rather than net profits.
Between November and January, Venezuela collected US$800 million from the windfall tax Venezuelan Oil Minister Rafael Ramirez said in February.
The OPEC member’s oil sector has been the driving force of Chavez’s revolution, contributing funds from everything to education, health and sports programs.
POPULATIRY BOOST
Chavez’s popularity ratings have improved in recent months to more than 50 percent as Venezuela recovers from a long recession and spending increases. However, many economists warn his bare-knuckle approach to the private sector makes it hard for business to contribute to growth.
Meanwhile, Venezuela said on Friday it formally left the Andean Community of Nations, a customs union that includes Bolivia, Colombia, Ecuador and Peru.
The foreign ministry said it will maintain trade relations with its South American partners “under other rules and principles.”
Venezuela said in 2006 it would leave the Andean trade group because of a disagreement about free-trade agreements with the US signed by pact members Peru and Colombia.
In recent weeks, Caracas signed trade agreements with Bolivia and Ecuador to promote “joint investments” and “fair trade.”
However, some Venezuelan business leaders fear that withdrawing from the Andean Community will make imports more expensive and lead to shortages of some goods.
Venezuela is awaiting approval from Paraguay to join Mercosur, another South American trade bloc that includes Brazil, Argentina, Paraguay and Uruguay.
Republican US lawmakers on Friday criticized US President Joe Biden’s administration after sanctioned Chinese telecoms equipment giant Huawei unveiled a laptop this week powered by an Intel artificial intelligence (AI) chip. The US placed Huawei on a trade restriction list in 2019 for contravening Iran sanctions, part of a broader effort to hobble Beijing’s technological advances. Placement on the list means the company’s suppliers have to seek a special, difficult-to-obtain license before shipping to it. One such license, issued by then-US president Donald Trump’s administration, has allowed Intel to ship central processors to Huawei for use in laptops since 2020. China hardliners
A top Vietnamese property tycoon was on Thursday sentenced to death in one of the biggest corruption cases in history, with an estimated US$27 billion in damages. A panel of three hand-picked jurors and two judges rejected all defense arguments by Truong My Lan, chair of major developer Van Thinh Phat, who was found guilty of swindling cash from Saigon Commercial Bank (SCB) over a decade. “The defendant’s actions ... eroded people’s trust in the leadership of the [Communist] Party and state,” read the verdict at the trial in Ho Chi Minh City. After the five-week trial, 85 others were also sentenced on
Conjoined twins Lori and George Schappell, who pursued separate careers, interests and relationships during lives that defied medical expectations, died this month in Pennsylvania, funeral home officials said. They were 62. The twins, listed by Guinness World Records as the oldest living conjoined twins, died on April 7 at the Hospital of the University of Pennsylvania, obituaries posted by Leibensperger Funeral Homes of Hamburg said. The cause of death was not detailed. “When we were born, the doctors didn’t think we’d make 30, but we proved them wrong,” Lori said in an interview when they turned 50, the Philadelphia Inquirer reported. The
RAMPAGE: A Palestinian man was left dead after dozens of Israeli settlers searching for a missing 14-year-old boy stormed a village in the Israeli-occupied West Bank US President Joe Biden on Friday said he expected Iran to attack Israel “sooner, rather than later” and warned Tehran not to proceed. Asked by reporters about his message to Iran, Biden simply said: “Don’t,” underscoring Washington’s commitment to defend Israel. “We are devoted to the defense of Israel. We will support Israel. We will help defend Israel and Iran will not succeed,” he said. Biden said he would not divulge secure information, but said his expectation was that an attack could come “sooner, rather than later.” Israel braced on Friday for an attack by Iran or its proxies as warnings grew of