March 19, 2020 / 1:58 PM / in 12 days

Cash-strapped Venezuela hikes public service fees amid coronavirus outbreak

CARACAS (Reuters) - Venezuelan utilities have hiked fees and the government plans to raise taxes, as the economy deteriorates further due to the spread of coronavirus and the crash in global oil prices adds to the strain on public coffers.

FILE PHOTO: Venezuela's President Nicolas Maduro speaks during a news conference at Miraflores Palace in Caracas, Venezuela, March 12, 2020. REUTERS/Manaure Quintero

Businesses in the South American country have seen surprise increases in monthly bills for services like trash collection, electricity and telephones over the past month. Earlier this week the government announced a 2,900% increase in the unit used to calculate taxes.

Venezuela’s annual tax collection has fallen below $2 billion, according to local consultancy Ecoanalitica.

President Nicolas Maduro’s socialist government last year relaxed price and exchange controls that had been in place for decades, and allowed transactions in foreign currency, to give the economy breathing room in the face of U.S. sanctions aimed at ousting him from power.

Still, the push to raise additional funds for the government by charging more for public services and collecting more in taxes stands in stark contrast to the fiscal incentives implemented in countries like the United States and neighboring Colombia to keep their economies afloat in the face of the coronavirus pandemic.

“The trash bill came out to 6 million bolivars, and I cannot pay that,” said a small business owner in Caracas who spoke on condition of anonymity. That amounted to around $80, more than 20 times what the business had paid in January.

Venezuela, which has reported 36 coronavirus cases so far, has implemented a nationwide quarantine and restricted travel between states in an attempt to contain the outbreak. The hike in service fees adds another hurdle to businesses already expecting sales to fall due to the emergency.

Two business associations sent letters to the government on Wednesday requesting fiscal benefits to help them survive the drop in activity due to the outbreak. Venezuela’s information ministry did not respond to requests for comment.

Science Minister Gabriela Jimenez told local radio last week that the government was considering an adjustment to the state telecommunications company’s phone and internet fees. While some utility companies are private, the government regulates the rates they charge users.

For years, the increases to the unit used to calculate taxes has been well below inflation. During the oil boom years, the government had enough funds to heavily subsidize most services, meaning the costs were barely taken into account by families and businesses planning their budgets.

The owner of a Caracas clothing store showed Reuters monthly bills for payments of electricity and trash collection of some 3 million bolivars, or $40 - ten times what was paid at this point last year. While that rate would be considered low in most countries, it is considered excessive in Venezuela.

In February, costs for services like internet and telephone lines rose between 80% and 749% - well above the rate of inflation, according to a report prepared by the opposition-controlled National Assembly and which was seen by Reuters. The national minimum wage is equivalent to just $3 a month, and household utilities costs have now risen to around $2.

Reporting by Corina Pons and Mayela Armas; Editing by Paul Simao

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