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Tue, May 09, 2006 - Page 10 News List

Venezuela mulls oil extraction tax

REVENUE BOOSTER A tax of possibly 33.3 percent on oil extracted by foreign firms is just one measure mooted by President Hugo Chavez to swell government coffers

AP , CARACAS

President Hugo Chavez said Venezuela would take further steps to increase revenues from its petroleum industry, including a new tax on companies that extract oil in the South American nation.

Chavez, who made the announcement on Sunday during his weekly television and radio program, said the measure would create US$1 billion in new revenue. He said details of the new tax would be revealed in coming days.

"We are going to create a new oil tax, called the tax on extraction," Chavez said. "The companies that are pumping oil in Venezuela are making a lot of money."

Venezuelan Oil Minister Rafael Ramirez said the government was considering a 33.3 percent extraction tax.

Oil companies would be able to subtract from tax bills whatever they pay the government in royalties, he told Union Radio.

Chavez said Venezuela also plans to raise income taxes to 50 percent from 34 percent for oil companies operating along the Orinoco River and boost taxes on natural gas businesses operating in this oil-rich South American country.

Chavez, a critic of capitalism, has accused foreign oil companies of exploiting his country's vast petroleum reserves without paying sufficient taxes and has taken steps to increase revenues from the industry.

Chavez applauded Bolivian President Evo Morales' decision to nationalize his country's natural gas industry, a move that has rattled foreign investors and other countries in the region.

"Hopefully, all Bolivians will understand that this is vital for Bolivia's future, just like what we are doing is vital for the future of Venezuela," Chavez said.

Last month, Venezuela voided oil-pumping contracts with private companies at 32 fields and replaced them with a mixed-company model that gave Venezuela's state-owned Petroleos de Venezuela SA a minimum 60 percent stake, sharply raised royalties and taxes and reduced potential drilling acreage by almost two-thirds.

Ramirez said the mixed companies would be exempt from the extraction tax because they already pay 33.3 percent in royalties.

Venezuela -- the world's fifth largest oil exporter -- has left foreign oil companies little leeway for negotiating the new contracts.

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