CARACAS (Reuters) - New Venezuelan taxes on windfall oil revenue will let socialist President Hugo Chavez boost spending on popular social programs by billions of dollars ahead of his re-election bid next year.
They set a top rate of 95 percent on some oil income and are Chavez’s latest move to increase the state’s share of the OPEC member’s main export. During 12 years in power he has nationalized most of the South American nation’s oil industry.
His government predicted on Tuesday the new tax rates will bring in between $9 billion and $16 billion this year if oil prices keep rallying. Chavez has earmarked the money for a social spending fund and is already splashing it around.
“This is justice,” he said as he unveiled pay rises of up to 66 percent for public sector workers. “It will create consciousness and look after the country’s wealth more.”
The tax hike was the latest example of resource nationalism by the leftist leader who is increasingly confident of winning another six-year term at a ballot due in December 2012.
Brightening economic prospects have boosted Chavez’s popularity after a hard couple of years, and the conflict in Libya has given him a chance to flex his oratory muscles as Latin America’s leading critic of U.S. foreign policy.
But more than anything, oil prices well over $100 a barrel are bringing money into Venezuela ahead of the election campaign — and Chavez has decided to increase his government’s take.
“What defines our government’s political position is who captures the oil revenue and how is it used,” Oil Minister Rafael Ramirez told reporters at the headquarters of state oil company PDVSA — the financial engine of his revolution.
“The oil revenue should be captured by the Venezuelan state as the representative of the collective interest ... and distributed in a revolutionary way for our people’s benefit.”
Chavez announced the top tax of 95 percent last week on “exorbitant” income when crude goes above $100 a barrel.
A further rate will take 20 percent from oil income between $40 and $70 per barrel.
Analysts cautioned the moves could have a chilling effect on foreign investment and limit the ability of PDVSA to fund more production.
“Chavez’s main motivation is likely to have more direct and arbitrary control over oil revenue ahead of the 2012 presidential elections,” said Daniel Kerner of Eurasia Group.
Chavez plans to launch a new government housing project at the weekend and this week revealed big increases to minimum wages and pensions.
Ramirez told Reuters the new tax rates would not apply to planned new output from existing fields, or to projects to tap the country’s vast Orinoco extra heavy crude belt, until the joint ventures had recouped their investments.
All this comes at a time when Venezuela is putting pressure on companies including Chevron, Repsol, BP and Shell to boost production at joint venture projects in South America’s biggest crude exporter.
Chevron and Repsol are among a number of companies, including companies from Russia and China, involved in plans to develop the Orinoco belt, one of the biggest mostly untapped hydrocarbon reserves left in the world.
Writing by Daniel Wallis; Editing by Frank Jack Daniel and Philip Barbara