Venezuela Imposes High Taxes on Petroleum

According to Ecuadorean "El Comercio" on April 28, Government of Venezuela announced on April 26 its imposing windfall profit tax on crude petroleum oil priced at above USD 40 per barrel.

This measure is expected to collect tax revenue of USD 9-16 billion from Venezuela's state-owned oil companies and foreign-invested oil companies.

Venezuelan energy minister Rafael said that President Chavez had issued the Crude Oil Windfall Profit Tax Act last week.

According to the provisions, when local price of crude oil rises to USD 40-70 per barrel, the government will impose a 20% tax; when the price rises to USD 70-90 per barrel, the rate will increase to 80%; when the price further rises to USD 90-100 per barrel, the windfall profit tax will increase to 90%; and when the price exceeds USD 100 per barrel, the tax rate will increase to 95%.

On April 26, the price of Venezuelan crude oil was USD 94.60 per barrel.

It is estimated that if in 2011 Venezuela-made petroleum remains at the price of above USD 90 per barrel, Venezuelan government is expected to get a windfall profit tax of USD 9 billion; if the price keeps USD 110 per barrel, the government can collect USD 16.3 billion in tax.

Collected taxes will be used in social projects to improve health, education, housing, agriculture and infrastructure.

But the Act is not applicable to new oil-well projects which are specifically developed for the supply to Latin American and Caribbean countries at preferential prices, nor applicable to the project signed between China and Venezuela in 2010, for ten years and worth USD 20 billion, that Venezuela offers 100,000 barrels of crude oil per day to China in exchange for China's goods and services.