CARACAS Aug 22, 2006 (Dow Jones Newswires)
Venezuela President Hugo Chavez's top ministers approved an income tax reform late last week that would raise taxes on oil activities and eliminate a number of tax breaks, a lawmaker confirmed Monday.
The new oil chapter of the pending income tax reform would increase taxes on oil activities to 50% from 34% on oil deals, including four Orinoco river belt crude projects, according to lawmakers and a copy of the reform proposal.
Members of Venezuela's National Assembly are expected to issue a final stamp of approval soon.
"We will meet tomorrow (Tuesday) to give a first approval to the law change and a final approval next week," said Ricardo Sanguino, vice president of the congressional finance commission.
Once congress and Chavez approve the law adjustments, he added, they will become effective in January.
Changes to the law also include getting rid of a combined set of tax breaks that companies received for additional investments during a fiscal year.
Under the new law, companies would no longer benefit from a set of three tax exemptions that together added up to 22% of new investments, according to the reform proposal.
Companies involved in developing natural gas projects or in oil refining will continue to pay the old 34% income tax, according to the plan.
Oil ministry officials worked with Seniat tax agency officials to draw the new law adjustments long anticipated by the oil industry.
In recent years Chavez raised taxes and royalties on oil companies operating in the Andean nation.
His administration has vowed to remake the oil industry to follow his nationalist agenda. The president has long complained that foreign companies had too much say in shaping Venezuela's oil industry.
Chavez has also accused some companies of violating contracts for years.
Copyright (c) 2006 Dow Jones & Company, Inc.
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