A new rule will punish for the first time the use of dollars, other currencies and cryptocurrencies in Venezuela. Parliament, an ally of Nicolás Maduro, approved last week a modification to the Tax on Large Financial Transactions that, with the distortions in the Venezuelan economy, will hit hard those who have taken refuge in dollars to save themselves from the hyperinflation that it has experienced. the country for the past four years. According to the text approved by the deputies, still awaiting its publication in the Official Gazette, paying with foreign currency will have a surcharge of between 3% and 20%.
“This law will allow the State to receive the dollars pocketed by the rich and large merchants,” said Jorge Rodríguez, head of the Venezuelan Parliament, during the debate on the regulations. Economists and tax specialists, on the contrary, point out that the tax is regressive and will have an inflationary impact, at the same time that it will encourage evasion and greater informality in payments.
The measure, which could come into force on March 1, has already generated great rejection and much uncertainty in the midst of the complicated Venezuelan economic crisis, in which the payment system has been disrupted with payments in different currencies and obstacles due to the lack of bills to give change. But Maduro has come out to defend her. This Monday he pointed out that there was a campaign against the law that only sought to “charge more to those who have more, to millionaires and billionaires” in a country with more than 90% of citizens in poverty. “That money that we are going to charge will have a very good effect for this year’s social investment and in strengthening the bolivar,” said the president.
Although referring to “large financial transactions” could give an idea that companies or individuals that move large amounts of money will be charged, in Venezuela the so-called special taxpayers are almost all. The income range to enter this category is to receive more than 30,000 annual tax units, which in the Venezuelan economy is equivalent to just over 120 dollars. In addition, analysts have warned that the regulations penalize the means of payment in foreign currency, not the amount of the transaction, which is why it will affect even those who go to the supermarket to buy eggs. Since 2016 there was already a tax for large transactions in bolivars, which with inflation became outdated. This new 3% tax will be added to the Value Added Tax, which is set at 16% for most goods.
The business association Fedecamaras has warned about the consequences that the application of this rate will have and asked Parliament to incorporate the private sector into a review of the provisions before their official publication. “Fiscal voracity will cause economic agents to go out of business due to high rates,” said Carlos Fernández, president of the organization.
The Maduro government has set itself two objectives with this new tribute. First, increase tax revenue, so for the 2022 budget he estimated a higher collection through this route than through income tax. In the report for discussion it is pointed out that this tax, which until now was charged to large transactions in bolivars, already represents 13% of the total collection, so with the inclusion of transactions in dollars they hope to increase that percentage. Chavismo seeks to take advantage of the dollars in which 70% of the country’s transactions are made and of the timid economic recovery that some sectors are experiencing, after having lost two thirds of the GDP. Second, it has a further goal of “de-dollarizing” the economy, which reached this point as a result of the voracious hyperinflation that led to more than a decade of controls. The incentive to use the bolívar that this measure supposes could become an inflationary boomerang.
He knows in depth all the sides of the coin.
The apparent opening of the economy to which Maduro has been forced seems contradictory in the face of these measures that rather contract consumption, a kind of “Doctor Jekyll and Mister Hyde” for the economist Manuel Sutherland. “In the midst of an economic crisis, contractionary measures are not taken. This tax is a legal-tax aberration, it is openly regressive, strictly unequal, it reduces consumption and will attack purchasing power and GDP”, says the director of the Center for Research and Training of Workers.
Maduro pointed out that with greater tax collection it will be possible to increase salaries that have lost all meaning in Venezuela, where the vital minimum does not reach two dollars a month, which is what pensioners and a large part of public administration employees receive. . “This is offering to pay a person with the money you take away from them,” says the economist.
The same government that decided to fill the shelves at any cost, after the brutal years of greatest scarcity between 2014 and 2016, that promoted imports without tariffs to the detriment of national production, that eliminated price controls and decriminalized illicit exchange to give entry to an informal dollarization of the economy now seems to turn the wheel again towards putting more limits on the economy. To this Sutherland adds the recent updates of the tariffs for procedures in notaries and registries that make the establishment of companies more difficult. The new tax that Venezuelans will pay comes just after the first year that the GDP recorded slight growth after seven years of decline.
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