Coro, April 24th 2011 (Venezuelanalysis.com) – This past Thursday Venezuela’s President Hugo Chávez declared that he would increase a windfall tax on petroleum companies in view of rising oil prices. Chávez announced on the television show La Hojilla that the measure was being taken in order to ‘adjust to the reality of oil prices on a global scale, which will continue to increase, in part, due to the madness unleashed in Libya’.
During the programme, Chávez highlighted that the increase in tax on oil revenue is a further step in raising resources for social investment, which has gone up by 60% in recent years. The ‘special contributions’ garnered from the tax will go directly to Venezuela’s National Development Fund in order to promote and maintain social projects, so that “a lot more of the revenue from oil will be kept for the Venezuelan people,” said Chávez.
A windfall tax on oil revenues was first implemented in April 2008 in response to high oil prices at the time, which meant that oil companies had “excessive earnings” that went beyond “reasonable levels of profitability”. The levy saw tax on oil revenues above $70 per barrel raised to 50% and an additional 60% on revenues over $100 per barrel.
Under the new law, Chávez indicated that when crude oil prices rise above $70 per barrel, companies will be taxed at 80% on the total amount of the difference – this will increase to 90% when prices fluctuate between $90 and $100 and to 95% when prices rise above $100.
Chávez was able to decree the law due to a special enabling power that was granted to him by the Venezuelan National Assembly in December last year. The enabling power lasts for 18 months unless Venezuelans revoke the decree in a referendum. During the television show the Venezuelan president also took the opportunity to denounce imperialist aggression against Libya and reiterated his call for peace in the North African nation.