Venezuelan President Hugo Chavez ratcheted up an oil windfall tax in a move that raises government income ahead of a presidential election, but puts a heavy load on oil companies in the Opec member state. The socialist Chavez, who will seek re-election next year, predicted oil prices will keep rising and said extra income from new tax rates will be transferred to a development fund for social spending.
"The decree is to increase the fiscal contribution and the contribution of petroleum resources to development," he said in a late night phone call to a television chat show on Thursday, adding that the war in Libya was driving prices higher. The new law was created under fast-track powers that allow the president to bypass Congress for several months and rule by decree. Chavez first introduced a windfall tax in 2008 of up to 60 percent on revenues from oil prices higher than $100 per barrel, based on the ideas of Nobel Prize-winner Joseph Stiglitz. Under the new rules, the government will take as much as 95 percent.
South America's biggest oil producer, Venezuela pumps almost 3 million barrels per day and has enjoyed sharply higher income from its main export in recent months. Despite the rising prices, already large transfers to the government mean state oil company PDVSA suffers cashflow issues and its profits fell sharply last year. The original windfall tax kicked in when prices rose above $70 per barrel in November.
Under the new decree, PDVSA and its foreign partners will have to pay the government 80 percent of income from sales of oil at more than $70 per barrel, rising to 90 percent when prices reach $90 per barrel. All income from prices over $100 per barrel will be taxed at 95 percent.
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