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Venezuelan value added tax among the lowest in the world

Next April the new value added tax (IVA) rate of 12% will come into effect, according to an announcement made by President Hugo Chávez when he also detailed other measures Venezuela would take to counter the global crisis.

This increase is atypical of the Bolivarian government, since for the last three years reducing the IVA has been a constant goal, with few exceptions.  This principle of reducing the tax was recently affirmed by Finance Minister Alí Rodríguez Araque, who said that depending on the global financial situation and its stabilization, it may be possible that the IVA could decline.

The Minister has also repeatedly noted that the increase of this tax, from 9 to 12 percent, will not affect inflation, which has been slowing down.  During the months of January and February of this year, inflation slowed to 1.6% compared to the same period in 2008, when it was 5.3%.

Nevertheless, the Chávez administration has been criticized by opposition sectors for economic policies that are primarily designed and implemented to defend the lowest income sectors of the population in the face of the global crisis.

Venezuela is not the only country that has taken this type of fiscal measure.  Several other countries have similar value added taxes, including Argentina (21%), Chile (19%), Colombia (16%), Mexico (15%), Peru (19%), Austria (20%), Italy (20%) and Denmark (25%).

In this context, despite the recent three percentage point increase in the Venezuelan IVA, the country still has one of the lower sales tax rates in the region, bested only by Paraguay which has an IVA of 10%.

According to data from the Tax and Customs Administration Office (SENIAT), in 1998 the IVA was 16.5%.  Furthermore, in January of 1999, when President Chávez took office, the IVA was lowered by one percentage point.

In August of 2002, the IVA was reduced again, this time to 14.5%, and in September of 2002, it was increased by 1.5 points, to 16%.  Two years later, in September of 2004, it was lowered again, to 15%.

In October 2005, it declined to 14%, and as of July of that same year, it was lowered to 9%, where it will stay until April 2009.

Prensa MinCi, Embassy of the Bolivarian Republic of Venezuela Press Office / March 30, 2009

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