Venezuela ramps ups taxes on private sector as Chevron oil exit bites

Reuters

02-06-2025

June 2 (Reuters) - Venezuela's government is increasing taxes and public service charges on the private sector to compensate for declining oil revenue after tighter U.S. sanctions, according to business leaders and analysts, who predict the measures will hinder already struggling private enterprise.
Washington in February canceled key licenses for a handful of partners and customers of state oil company PDVSA (PDVSA.UL), including Chevron (CVX.N), opens new tab, that had allowed them to export Venezuelan oil under U.S. sanction exemptions. It also imposed secondary tariffs on Venezuela's oil buyers.
Analysts estimate these actions could reduce the OPEC member's oil income, which was around $15 billion in 2024, by approximately 30%.
This anticipated revenue loss has led the government to demand advance tax payments, conduct more audits, levy significant fines, and permit local authorities and public service providers to raise their fees, said a dozen businesspeople. These measures add pressure to a private sector grappling with years of economic crisis, high inflation, and currency controls.
Neither the communications ministry, finance ministry nor tax agency responded to requests for comment.
President Nicolas Maduro, who in April decreed an economic emergency that allows him to erase tax exemptions, had already asked officials in January to double tax income from $5.2 billion last year. Officials are heeding the call - tax revenues rose by about a fifth in the first quarter.
Maduro's government has always rejected U.S. sanctions, referring to them as an "economic war".
Businesspeople have held meetings with the government in a bid to have some taxes revised, three sources said, but to no avail.
A May survey by the industrial guild Conindustria, which represents producers of food, chemicals, plastics and textiles, found that 77% of businesspeople identified the tax burden as the primary obstacle to their operations. About 60% of those surveyed plan little to no increase in production in the coming months.
"Whatever additional tax is paid will come from the working capital," said Luigi Pisella, president of Conindustria. He added that the tax base must be expanded to avoid concentrating the burden on existing businesses.
"Those who manage a bit of growth will be those who can manage this adverse environment," said one industrialist, who asked not to be named.
Ruling party lawmaker Jose Vielma cheered the increased tax collection.
"With higher tax take it has been possible to alleviate difficult economic moments," Vielma told Reuters. "We must thank the private sector, which has made a sufficient contribution."
Analysts put it more bluntly.
"Taxes are a lifesaver for the government," said Luis Barcenas, an economist at Venezuelan firm Ecoanalitica. The firm estimates the tax take could be as much as $13 billion this year and that companies are devoting half their earnings to tax payments.
The Conindustria survey showed larger businesses do not expect to increase jobs, while medium-sized companies said they could reduce headcount by about 1%.
"When you don't have working capital, you stop creating jobs," said one businessperson.
Some sources, especially from the retail sector, said they are closing stores with lower sales.
"When a customer pays for a product, they are paying for a good portion of the taxes that the merchant is giving to the state," said a businessman from central Venezuela, saying municipal taxes are also weighing heavily on prices.
Local manufacturers tend to have factories in more than one municipality, meaning they are often liable to more local taxation than the few remaining international companies in Venezuela, who import products or have limited factories in-country.
"For companies with local production the impact is even more critical," said the director of a foreign company, who asked not to be named.
Outage-prone public services were heavily subsidized when oil income was generous, but prices have more than doubled in the year to March, according to the Venezuelan Finance Observatory.
Inflation, which ended last year at 48%, is expected to reach 200% by the close of 2025.