History of The Venezuelan Oil Industry - 1999-present - "Re-Nationalization" and Tax Reform

"Re-Nationalization" and Tax Reform

Following the December 2002 to February 2003 oil strike, Chávez referred to regaining control of the industry as "re-nationalization". He aimed at improving the efficiency of PDVSA in the context of distributing a greater amount of its revenues to the government and also by certain changes in taxation. Certain tax reforms had already been implemented earlier in Chávez's first term. As of 2001, royalty payments were nearly doubled to 30 percent of the price at which every barrel is sold compared to before when it was 16.67 percent. Also in 2001, the government lowered the income tax levied on oil extraction from 67.6 percent to 50 percent.

It is important to note the political environment during the time of the strike. In April 2002, the opposition attempted to overthrow Chavez, while calling for an "indefinite national strike" which in fact turned out to be a forced 'bosses lock out' where the employees were prevented from working. The documentary The Revolution Will Not Be Televised critically examines this attempted coup, and particularly focuses on the role of the international mass media in supporting the opposition and allegedly even taking part in propaganda which aimed at discrediting the Chavez government.

In 2006, the government had a forty percent share which was announced to be increased by twenty percent. Some believe this move could potentially burden PDVSA with investment costs, but Chavez created several new subsidiaries of PDVSA to try to prevent unwanted costs from happening. These subsidiaries include agriculture, shipbuilding, construction, and industry. Chavez also put effort into diversifying the economy.

Read more about this topic:  History Of The Venezuelan Oil Industry, 1999-present

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