CARACAS, (Reuters) – New Venezuelan taxes on windfall oil revenue will let socialist President Hugo Chavez boost spending on popular social programmes by billions of dollars ahead of his re-election bid next year.
They set a top rate of 95 percent on some oil income and are Chavez’s latest move to increase the state’s share of the OPEC member’s main export. During 12 years in power he has nationalized most of the South American nation’s oil industry.
His government predicted on Tuesday the new tax rates will bring in between $9 billion and $16 billion this year if oil prices keep rallying. Chavez has earmarked the money for a social spending fund and is already splashing it around.
“This is justice,” he said as he unveiled pay rises of up to 66 percent for public sector workers. “It will create consciousness and look after the country’s wealth more.”
The tax hike was the latest example of resource nationalism by the leftist leader who is increasingly confident of winning another six-year term at a ballot due in December 2012.
Brightening economic prospects have boosted Chavez’s popularity after a hard couple of years, and the conflict in Libya has given him a chance to flex his oratory muscles as Latin America’s leading critic of U.S. foreign policy.
But more than anything, oil prices well over $100 a barrel are bringing money into Venezuela ahead of the election campaign — and Chavez has decided to increase his government’s take.
“What defines our government’s political position is who captures the oil revenue and how is it used,” Oil Minister Rafael Ramirez told reporters at the headquarters of state oil company PDVSA — the financial engine of his revolution.
“The oil revenue should be captured by the Venezuelan state as the representative of the collective interest … and distributed in a revolutionary way for our people’s benefit.”
Chavez announced the top tax of 95 percent last week on “exorbitant” income when crude goes above $100 a barrel.. Prices over $70 trigger a 80 percent rate.
A further rate will take 20 percent from oil income between $40 and $70 per barrel.
COMPANIES UNDER PRESSURE
Analysts cautioned the moves could have a chilling effect on foreign investment and limit the ability of PDVSA to fund more production.
