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Chavez Changes Mind On VAT Increase

by Mike Godfrey, Tax-News.com, Washington

06 January 2011


Venezuela’s President Hugo Chavez has disclosed that the government does not now plan to increase the rate of the country’s value added tax (VAT), as he had previously announced.

A rise in VAT had been seen as necessary to finance reconstruction spending after the recent flooding. Chavez made no mention of the dimension of the proposed rise, but said that a one per cent rise in the VAT’s current 12% rate would yield around VEB5bn (USD1.2m).

To increase the VAT rate, Chavez had been ready to use the special decree powers that had been afforded to him by the previous parliament. However, following opposition that such a policy would be regressive and exacerbate inflation in the Venezuelan economy, Chavez has now announced that such a VAT increase will be unnecessary.

He pointed to higher global oil market prices, which are providing additional funds for the country from its petroleum exports, as negating the need for such a tax increase. In that case, other tax-raising measures that had been forecasted, such as a bank transactions tax or increases to the taxation of power supplies, would also appear to be off the table.

TAGS: tax | value added tax (VAT) | Venezuela | tax rates

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