I gladly, punctually and accurately pay the taxes that correspond to my modest income. With this amount I also pay for all of those who should pay and don’t, those who pay in small amounts of foreign currency or those companies which, despite the great profits they accrue in Venezuela, contribute very little.
Let's take a look at where tax collection, which makes up seven percent of Venezuela’s gross domestic product (GDP), comes from.
Who doesn’t pay taxes?
In Venezuela, those who do not pay taxes, or pay a negligible proportion of their income, are:
- Those who finance government borrowing. According to the Central Bank of Venezuela (BCV), Venezuela’s debt stood at US $110 billion at the end of the first quarter of 2019. By law, these creditors are exempt from paying taxes on the juicy and timely government interest payments.
- Citizens and companies from thirty countries which are benefited by infamous treaties for the avoidance of double taxation. These treaties exempt people and companies from paying tax on the profits obtained in our country. Meanwhile Venezuelan taxpayers pay for [public] education, healthcare and pensions for their workers, as well as for public services, mass transport systems, roadways and the legal system. According to estimates by economist Nagib Ayaach, which were updated by Paulino Núñez, about US $17.8 billion is lost in Venezuela in uncollected taxes every year because of these treaties. Among those who benefit from such a generous gift are actors from nations such as the United States, Canada, the UK and Spain, which do not recognise our legitimate government and use the money that they fail to pay us, or steal from our foreign assets, to finance interventions, sabotage, invasions and assassination attempts. Apart from turning the other cheek, we allow ourselves to be hit time and again.
- Colombian exporters, who are exonerated from paying tariffs in our country on 2,000 items or goods due to the  Cartagena Agreement. The agreement was a fraternal gesture to the neighbouring government, which in turn offers its territory to train paramilitaries, prepare presidential assassination attempts, even including US mercenaries are hired to invade Venezuela.
- Large-scale businessmen who transfer their dividends to "foundations.” Since these “foundations” are allegedly not-for-profit, they do not pay taxes and actually operate as piggy banks for their creators.
- The oligarchy which owns immense estates and properties, as only midway through 2020 was a Tax Law for Large Estates created.
- Large asset owners, whose goods increase in value thanks to the infrastructure and services provided by the state (such as communications, sanitation, energy, policing, etc.). These large asset owners do not pay a penny for these privileges, since our country is one of the few in the world where there is no capital gains tax or social responsibility contributions.
- Foreign and domestic capitalists who transfer their profits to tax havens, which are immune to taxes and deny all [financial] information requests.
- The large number of retailers, which do not invoice sales or services rendered, so that the value added tax (VAT) which consumers pay, sometimes involving great sacrifice, is not passed along to the tax office but stays in the oversized pockets of the shop owner.
- Those who run lotteries, bingos, casinos, other gambling and betting businesses, human trafficking rings and other illegal enterprises, economic activities with very little oversight and public control.
- Importing companies which benefit from existing tax exemption and duty fee schemes on 3,289 tariff codes or products until December 31 this year, including 77 additional tax free codes which were approved by decree in March, effectively exempting them from VAT, import taxes and customs.
- The myriad of criminal associations and foreign individuals, such as illegal mining rings, which illegally and clandestinely extract our riches without any accountability.
- Infiltrated paramilitaries, who run violent extraction smuggling and illegitimate trafficking operations, creating enclaves of social, economic and political power which look to destroy the Republic.
- Foreign enterprises which benefit from article 29 of the Direct Investment Promotion Act of December 28, 2018, (also called the Law on the Promotion and Protection of Foreign Investment). According to the bill, these enterprises benefit from the following schemes, which do not apply to Venezuelans: (a) tax exemption programs, (b) rapid repayment schemes, (c) state purchase of production, (d) tax bonuses, (e) customs exemptions, (f) subsidies, (g) special credit conditions, (h) preferential conditions for repatriating profits, and (i) preferential access to state-administered raw materials. This also includes any other person or company designated to be included for five-year tax immunity by, among others, the President. Such incentives "shall be progressive in accordance with the fulfilment of the objectives set out in the relevant investment project".
In short, it is the sectors of large capital which should pay taxes and do not, or pay almost nothing.
According to the BCV, in 2017 almost 50 percent of everything produced in the country came from enterprises run by these sectors, while only 18 percent of the profits made from these goods were used to pay wages for the workers who produced them.
Here we can see why, according to Venezuela’s National Integrated Service of Border and Tax Administration (SENIAT) tax administration, only 9 percent of the GDP comes from taxes. Of this, 7 percent comes from VAT, which is mostly paid by the 95 percent of the labour force, the wage-earners, and only the remaining 2 percent come from income tax, also mostly paid by wage earners.
Who does pay taxes?
- All Venezuelan workers who earn more than the minimum wage are required to pay income tax, which is irremissibly deducted by their employers. It should be noted that while the tax unit is regularly increased alongside inflation, the permitted single allowance and the floor for exemption tend to remain fixed.
- All Venezuelan workers who see contributions deducted from their salaries. These include compulsory social security, forced stoppage insurance, housing savings, pensions, assistance and prevention institutes fund payments, forced trade unions affiliation and other "para-fiscal" contributions which rarely benefit those who pay them.
- Venezuelan citizens and the mostly small or medium-sized businesses that do not share the privileges granted to foreign enterprises. These end up paying a set of municipal, regional, and national contributions such as inheritance or donation taxes, service fees, patents, tax stamps and overheads that are sometimes charged for the total area of a property, floor by floor, amongst others.
- All Venezuelans, as co-owners of the wealth below the national soil, when the state sells those assets or property, and reports the price to the tax office as "hydrocarbon income" or "mining income.”
- All Venezuelans who pay the neoliberal Value Added Tax (VAT), which is currently set at 16 percent and is applied to the value of every purchase, except a few exempt products. These additional contributions rarely reach the taxman, because as we noted above, the vast majority of retailers do not issue invoices or declare receipts, and [fiscal] control over their sales is as (non-)existent as price controls. Producers and intermediaries reclaim whatever VAT is paid by increasing the price of goods according to inflation, until the extra cost reaches the consumer who cannot pass it on to anyone else. It should be added that even if taxpayers are exempt from income tax due to their income levels, VAT still must be paid.
In summary, we can observe that taxes in Venezuela are paid by salaried workers, being as they are the majority of hard-working and honest compatriots whom [Venezuelan writer] Arturo Uslar Pietri once described in a rugged but certain way as pendejos [fools].
As the majority of the country’s workforce, they produce almost all of the country’s GDP and receive only 18 percent of it through wages. Unlike business owners, they cannot deduct "normal and necessary" expenses required to work from their tax contributions, such as food, transportation and housing, and are only able to declare negligible exemptions for a limited number of dependents and medicines.
[US journalist] Ferdinand Lundberg explained in his book The Rich and the Super Rich that you can tell which class is dominant in a social system because it is the one that has managed to immunise itself against taxation. In this regard, the capitalist world’s abuse is so great that Oxfam, and even billionaires like Warren Buffet and Bill Gates have declared that the rich should pay more taxes. "That’s why I’m for a tax system in which, if you have more money, you pay a higher percentage in taxes. And I think the rich should pay more than they currently do, and that includes Melinda and me.," the latter writes on his blog. Only misguided neoliberal apologists consider it a crime to raise taxes on large capital.
With elections on the horizon, we can ask ourselves whether it is preferable to have a tax system that favours the five percent who are business owners, or one which allows the remaining 95 percent of the workforce to survive.
Luis Britto Garcia is probably Venezuela’s most highly regarded living writer. He was recently appointed as the coordinator of the Venezuelan chapter of the Red de Intelectuales y Artistas en Defensa de la Humanidad [Network of Intellectuals and Artists in Defense of Humanity]. A firm supporter of the Bolivarian Revolution, he has written numerous plays, novels, historical works, and film scripts in addition to regular political commentary.
The views expressed in this article are the author's own and do not necessarily reflect those of the Venezuelanalysis editorial staff.
Translation by Paul Dobson for Venezuelanalysis.