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Venezuela Levies Social Charge On Banks

by Leroy Baker, Tax-News.com, New York

16 November 2010


The Venezuelan National Assembly has approved a bill to change the banking service into a "public service", by imposing a special 5% charge on their net profits and establishing a social fund from the proceeds.

Article 48 of the bill states that banks should demonstrate their "social responsibility" by financing communal council projects and other forms of social organization stipulated in the law.

Article 8 suggests that banks not complying with “social solidarity” obligations could be subject to interventions by the government, including liquidation.

It is being debated whether this would lead to nationalization of the banks, especially since Chavez was quoted as saying he would not hesitate to seize institutions that "failed to meet directed lending requirements".

President Hugo Chavez has closed 14 banks this year after they failed to comply with capital requirements. The government has also seized assets of bank directors who fled the country, according to Business Week.

The bill also sought to avoid excessive concentrations of risk in large institutions by restricting the size of any one institution to no more than 15% of total banking sector assets, which will entail some reorganization. The bill also envisages the creation of a micro finance bank.

Assembly deputy Pastora Medina complained that the bill had not been on the agenda and had been presented without consultation other than among the finance committee members. The finance committee chairman Ricardo Sanquin countered that the measures had been under review for more than 10 years and discussed in the Assembly in previous sessions. The first reading of the bill has been approved and it will need a second reading before enactment.

TAGS: tax | Venezuela | law | banking | fees

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