Venezuelan Energy Minister Ali Rodriguez said on November 6th that the new oil law which is expected to obtains national assembly approval within the next months will raise royalties on oil production but will lower income taxes, reported the local newspaper El Universal.
All foreign companies with existing oil production contracts will be offered revised fiscal terms under a new law. Rodriguez said to El Universal that: “A clause (of the new law) will establish voluntary conversion to all previously signed agreements to the new fiscal regime.”
The new law, which would raise royalties leveled on oil production and lower income taxes, is expected to be decreed by President Hugo Chavez in the coming months after obtaining Congressional approval.
The changes would benefit the Venezuelan government because royalty is a more reliable income than profit tax, and will be easier fro everybody to plan and calculate the payments, the royalty will have a higher floor - 16 2/3 of the crude oil value to 20 percent or for every six oil barrels one is for Venezuela, the income tax rate will come down from 67.7 percent to 34 percent.
Rodriguez said that: “We lack a system of fiscal control, so we have to go towards more simple schemes which are easier to handle. That’s why we want to increase the royalty, because it’s a simple calculation.”