Chavez: Oil companies must pay taxes

Venezuelan president says private companies evading taxes on 1% royalty due on heavy oil; legislature will investigate

Alice M. Chacon

Associated Press Writer

Venezuelan President Hugo Chavez said May 8 that foreign oil companies working in the country must pay taxes he insists they owe the country, or else leave the country.

“The companies must pay what they owe,” Chavez said during his May 8 television and radio show. “If they don’t pay, they must leave,” he added.

Chavez said that many private companies producing oil in the company have been evading taxes for years. Tax officials have said that many declare losses to avoid paying income tax.

Chavez said that they must be charged retroactively.

The government will charge “everything they owe retroactively, along with the interests of what they didn’t pay,” he said.

“It’s not possible that an oil company can come here, pay 1 percent royalty and not pay income tax, and still declare losses,” he said.

According to Venezuelan law, oil companies must pay 30 percent royalty, but companies producing heavy crude — which is expensive to produce — were allowed to pay 1 percent royalty until last year, when the government raised it to 16 percent.

“All oil production gives earnings,” he added.

Venezuelan lawmakers will investigate international oil companies accused of evading taxes and other charges, said the National Assembly President Nicolas Maduro May 7 according to the state-run Bolivarian News Agency.

Lawmakers expect to find evidence of tax evasion, royalty debts, production over the limit set by the government and irreversible damage to some wells, Maduro, a pro-government lawmaker, was quoted as saying.

Maduro said top officials of the state-run oil company Petroleos de Venezuela, who negotiated agreements with foreign oil companies in the mid 1990s, would be questioned in the investigations.

Foreign firms will be made to pay damages if evidence against them is found, Maduro added.

Oil industry opened in 1990s

Oil Minister Rafael Ramirez said in April that many of these companies have evaded taxes for an estimated total of $2 billion.

Venezuela is the world’s fifth oil exporter and government officials say it produces more than 3 million barrels a day. But analysts and international agencies say the amount is closer to 2.6 million.

Chavez said that Venezuelan lawmakers should work to approve a law the government to use money from the country’s international reserves for government projects.

He has proposed that there should be a limit to the amount of the reserves, which should be between $18 billion and $20 billion. Currently reserves are over $27 billion due to high oil revenues, Chavez said.

“We are at almost $28 billion in international reserves. That is too much money to have it kept away, and in banks in the north (the United States), because we don’t have it here,” he added.

Under current Venezuelan law, only the Central bank has access to the reserves. Central Bank directors say that using the reserves for government programs would undermine Venezuela’s bolivar currency and harm the country’s standing in international financial markets.