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Venezuela Eyes New Tax on Oil Companies

March 26, 2008
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According to the Associated Press, Venezuela will soon impose a new tax on oil companies aimed at recouping a larger share of their rising profits, President Hugo Chavez said recently.

The new levy will be a tax on "unexpected earnings" generated by the steep rise in world oil prices, Chavez said. His administration has readied a bill outlining the new tax -- although he said it has not yet determined what the tax rate will be.

The move by Venezuela comes after the U.S. House of Representatives last month approved $18 billion in new taxes on the largest oil companies, with Democrats citing record oil prices and rising gasoline costs in a time of economic troubles.

The White House, however, said the bill unfairly takes aim at the oil industry. President Bush is expected to veto the legislation if it passes Congress.

Venezuela''s socialist president, who has mentioned plans for the tax before, could approve the country''s new tax by decree under fast-track powers that the National Assembly granted him last year. Those powers expire in July.

Chavez has moved to increase state control over the oil industry in recent years, while letting foreign companies stay on as minority partners in oil fields they once managed under contract.

In 2005, Chavez raised royalty rates to 30 percent from 16.6 percent on foreign firms operating heavy oil projects in the crude-rich Orinoco River region, and last year the government assumed majority control of those projects.

Companies operating in Venezuela include U.S.-based Chevron Corp., France''s Total, Britain''s BP PLC and others.

Chavez said the idea for a new tax arose from a conversation with Joseph Stiglitz, the 2001 Nobel Prize winner for economics.

Soaring oil prices have been linked to the falling value of the dollar, Chavez noted, blaming the U.S. slowdown on the "imperialist ambition of the president of the United States, among other things."

Chavez has called the U.S. war in Iraq an attempt to seize control of that country''s oil.
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