Venezuela To Prolong Transaction Tax For One More Year

by Amanda Banks, Tax-News.com, London

14 March 2003

The government of Venezuela has decided to prolong its financial transaction tax by another year in order to to help repair its strike ravaged economy.

The two month strike which began late last year all but shut down the country's economically vital oil industry. It also resulted in many businesses ceasing trading, including the nation's stock exchange. Understandably, this has led to a sharp fall in government revenues as a result. It is estimated that oil revenues count for about half the government's total income, underlining the plight in which it now finds itself.

However, the tax, which currently stands at 1%, will gradually decrease over the course of the next year. It is expected to fall to 0.75% in July of this year, and to 0.5% by March next year. Officials hope that the extension of the tax will contribute some VEB1.5 trillion ($939 million) to the national coffers.

The Venezuelan economy contracted by about 9% last year, though in the coming year, economists estimate it will shrink by a massive 25%. This will result in government experiencing financing needs of some 10% of GDP.

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