Venezuela Widens Foreign Company Tax Probe

by Mike Godfrey, Tax-News.com, Washington

07 October 2005

The Venezuelan tax authorities have taken action against a number of large multinational firms operating in the country as the government continues to pursue an aggressive "zero evasion" policy.

In its latest action to ensure tax compliance, the Venezuelan tax agency, Seniat, has ordered the temporary closure of a number of foreign companies, including IBM and Bosch Rextroth, due to bookkeeping irregularities relating to income tax and value added tax.

Seniat also revealed in a statement that it has ordered the temporary closure of a further 15 domestic and international business, including Nokia, Ericsson and Honda, for periods varying between 24 and 48 hours. It is uncertain why the tax office has targeted these particular firms.

The government of President Hugo Chavez has instigated a hard line policy on company tax compliance in the past year in an attempt to extract record levels of tax revenues. As the world's fifth largest oil exporter Venezuela has been especially keen to improve tax collection from the oil sector, and has accused foreign oil companies of avoiding $3 billion in taxes resulting from deals struck under the leadership of former President Rafael Caldera in the 1990s.

In August, it emerged that the Venezuelan tax authorities had asked a court for an injunction over Royal Dutch Shell PLC assets worth US$130 million, stemming from a contested tax bill covering the years 2001-2004.

Around two dozen oil companies including Chevron, BP and Total are reportedly under investigation in Venezuela.

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