April 03. 2008
CARACAS -- Venezuela moved to take a greater cut from high oil prices on Thursday when the legislature gave initial approval to a bill setting taxes as high as 60 percent on profits from increases in crude prices.
''Sudden profits'' made by foreign oil companies would be taxed at 50 percent when the average monthly price for benchmark Brent crude exceeds $70 a barrel, according to the bill that passed its first reading in Venezuela's National Assembly.
An average Brent price of $100 would trigger taxes of 60 percent.
The bill said the Energy Ministry would lay out the mechanism for calculating the tax, which would be based on the difference between the trigger price and actual sale price. Heavy Venezuelan crude generally sells for less than light Brent oil from the North Sea.
Companies would be able to deduct the new taxes from their regular income taxes, which are currently set at 50 percent.
Ruling party lawmaker Angel Rodriguez told Venezuela's state-run news agency the tax was justified because ''oil companies have excessive earnings that go beyond reasonable levels of profit.'' He said they are generated by increasing demand for petroleum on world markets rather than by investments.
The bill would not take effect until it is approved a second time by the National Assembly, which is controlled by allies of President Hugo Chavez. Final approval could come next week.
The legislation would broaden state control over foreign oil companies operating in Venezuela -- home to the largest petroleum deposits in the Western Hemisphere.
In London on Thursday, May Brent crude fell $1.23 to settle at $102.52 a barrel on the ICE Futures exchange.