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Tax increases of nearly 10,000% smother companies in Venezuela

Venezuela’s private sector, weakened after seven years of recession, has warned of a “fiscal voracity” due to the increase in municipal taxes to almost 10.000% since 2019, which led traders to informality and hampered the path to economic recovery, according to businessmen .

The president of the National Council of Commerce and Services (Consecomercio), Tiziana Polesel, told Efe that in just over two years, the tax rates that businessmen have to pay every month on their gross income went from 0.05% to 5% in most municipalities, which represents an increase of 9.900%.

This “dramatic” increase, explained Polesel, has caused some traders to become informal and others are considering the possibility of doing the same.

In addition, Polesel warned that the “voracious” increase in taxes caused some traders to move to municipalities where the tax burden, although high, is lower, and owners of pharmacy chains, hardware stores and spare parts stores have closed branches.

“It is really worrying how some merchants say they are thinking to close in certain states or move to another municipality because the burden they have in the municipality where they are is unsustainable, they call it confiscatory. They say, colloquially: ‘I’m only working to pay taxes, because I have nothing left’”, he commented.

Polesel explained that some municipalities prevent companies from declaring their taxes if have not previously paid for garbage collection, whose rate of increase was “greater than 3.000%”. This means that a delay in the payment of the service leads to a block in the payment of taxes and, therefore, to a fine for late payment, which increases the tax even more.

The Federation Chambers and Associations of Commerce and Production (Fedecámaras), the main employer in the country, denounced that the “fiscal voracity” that exists “could, in some way, make the “path to recovery much more difficult”, noting that the city ​​halls issued orders “which even left the fiscal planning scheme” and created “some quasi-fiscal fees” charged by institutions to allow commercial operations in some regions.

According to businessmen, it is necessary to add the This is the recent reform made by the national government of the Tax on Large Financial Transactions (IGTF), through the inclusion of a 3% tax on payments made in foreign currency, which took effect last March.

Based on official figures, Venezuela collects heu, in the first five months of the year, 8,015 billion bolivars, equivalent to US$ 1,781 billion at the rate of official exchange rate, which represents 69,5% of the total of US$ 2,560 billion of

.

Economists say this improvement in revenues is due to greater economic activity compared to 2021, which could be reversed if more companies join the sector informal sector or reduce their activity due to “fiscal voracity”.

Like Polesel, the president of the Venezuelan Confederation of Industries (Conindustria), Luigi Pisella, told Efe that “many industries, especially small and medium-sized ones, have migrated to the informal sector because they cannot face the tax burden.”

According to Pisella, the manufacturing sector is in favor of “contributing to the treasury”.”, and defends a tax “culture”, in order to broaden “the tax base, and not increase collection rates, which is what has been happening”.

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