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Venezuela needs income tax overhaul to boost revenue -legislator

Source: Thomson Reuters Foundation - Tue, 5 Feb 2013 23:04 GMT
Author: Reuters
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By Deisy Buitrago

CARACAS, Feb 5 (Reuters) - Venezuela needs an urgent overhaul of its income tax system to boost government revenue and ensure wealthier citizens pay a greater share than the poor, a member of the national assembly's finance commission said on Tuesday.

Government coffers are under strain from heavy campaign spending in 2012 that helped ensure reelection for socialist President Hugo Chavez - who has spent nearly two months in Cuba receiving cancer-related treatment.

With a fiscal deficit estimated near 15 percent of gross domestic product, the government appears to be seeking new methods of bring in revenue while postponing a politically unpopular currency devaluation economists say is necessary to shore up government finances.

"This is a necessity and a requirement, it is in line with a basic principle of the transition to socialism under which those who have more should give more, to help those who are most in need," said legislator Jesus Faria. "We are in an environment of economic growth, so a decision like this should not cause any trauma."

Any such change would have to go through the finance commission, but Faria did not provide details on specific proposals.

A reform of income tax collection would not give the state any additional revenue until 2014, because income tax is collected on business carried out the prior year.

Although the oil industry already pays a relatively high income tax rate of 50 percent, private companies and state-run firms in other sectors pay 34 percent.

The most recent reforms to the tax code have eliminated deductions and exemptions rather than changing rates.

Finance Minister Jorge Giordani has also urged changes in income tax to make the system more equitable.

Such a move would likely be harshly criticized by opposition leaders, who insist the government has squandered billions of dollars in windfall oil revenue through corruption and mismanagement. (Writing by Brian Ellsworth; Editing by Phil Berlowitz)

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