December 14, 2010 / 3:02 AM / 7 years ago

UPDATE 1-Chavez to decree Venezuela sales tax rise

* Says extra money needed in response to floods’ crisis

* To be spent on housing, infrastructure, Chavez says (Adds details)

CARACAS, Dec 13 (Reuters) - President Hugo Chavez said on Monday he would use special decree powers to hike Venezuela’s sales tax rate and raise cash to help the South American nation recover from disastrous floods.

“We need extraordinary funds and one of the laws we are going to approve with the Enabling Law is going to be a rise in sales’ tax,” Chavez said.

The Venezuelan leader said the government had still not decided by how many points it wanted to raise the tax from the current level of 12 percent. But any increase would have only a “minimal effect” on inflation, Chavez said.

Each percentage point rise in the sales tax would raise 5 billion bolivars, Chavez said, without specifying over what time period that would be.

Five billion bolivars represents $1.16 billion at the middle range -- 4.3 bolivars to the dollar -- of Venezuela’s multi-tiered foreign exchange system.

The move will please holders of Venezuelan bonds, who welcome signs of fiscal soundness in the recession-hit economy of South America’s top oil exporter.

Venezuela’s parliament is expected to approve special fast-track decree powers for Chavez this week. He says they are needed to respond to floods that have killed at least 35 people and left more than 130,000 homeless. [ID:nN13234381] (Reporting by Andrew Cawthorne and Mario Naranjo; Editing by Jackie Frank)

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