Through strong enforcement of Venezuela's tax system everyone now pays
Oil Wars Blogspot: Being a wage slave in the United States one of my gripes has always been that while I pay a high tax rate and have to pay every penny I owe, due to it being automatically deducted from my paycheck and reported to the government, many businesses and wealthy individuals pay lower tax rates and/or easily evade the taxes they owe.
What has the US government done to redress this? Nothing.
In fact it has enacted large tax cuts that overwhelmingly benefit the wealthy (one of the worlds wealthiest men, Warren Buffet, if fond of pointing out that his secretary pays a higher percentage of her income in taxes than he does) and it has cut back on audits that could detect tax evasion.
Fortunately for Venezuela, Hugo Chavez has taken a completely different approach. He has put real teeth in his tax collection agency, SENIAT, and as a result it has done a much better job of collecting taxes. He has also ended giveaways to multinational oil companies and increased their tax rates to make them pay their fair share.
All of this has served to dramatically increased government revenues which in turn have allowed the government to carry out large scale public works and expand social programs.
Yet that is not all it has allowed the government to do.
A very interesting effect of all this is that Chavez has been able to cut taxes for ordinary Venezuelans quite significantly. The main tax in Venezuela is called the IVA and is a value added tax that people pay when making purchases.
In 1998, immediately before Chavez came to office, it was 16.5%. In 1999, with Chavez in office, it was lowered to 15.5%. In 2000 it was further lowered to 14.5%. In 2002 with a recession and the adverse effects of political upheaval it was increased back up to 16%.
Since then the IVA tax has been cut dramatically: to 15% in 2004, 14% in October 2005, 11% in March of 2007, and now to 9% effective this past Sunday. This means the primary tax in Venezuela has very nearly been cut in half during Chavez’s time in office! Who does he have as his Budget Director, David Stockman?
Now, I am not really the biggest fan of supply side economics. Personally I think taxes shouldn’t be lowered until a government manages to pay off a lot of the debt it has, and Venezuela still does have plenty of debt it could pay.
But there is something here that really is great and is the reason I wanted to highlight these tax cuts. These tax cuts are possible because the government has done such a good job in ensuring that everyone pays what they are supposed to pay. That is, it is possible to reduce the IVA tax to 9% because they are actually managing to collect that tax from just about everyone. And it sure is a lot fairer and better for everyone to pay a low 9% rate than to have some people have to pay a high 16% rate just because a lot of cheats get away with paying nothing.
So there you have it: Chavez, through strong enforcement measures, has greatly increased the fairness of the Venezuelan tax system by ensuring that everyone pays, but because everyone pays all can then pay less. Now, if only we could get a government in the United States that thought like that.
- Oh, and one final point on this. Note that the opposition has next to nothing to say about this reduction in taxes. That is rather curious given that they often talk about the rule of law, equality before the government, etc, etc.
Yet now that Chavez makes sure that the rule of law is upheld, and people pay the taxes they are supposed to, the opposition is silent.
I guess their professed love for the “rule of law” comes to a screeching halt when it is going to hit them in the pocketbook by making them pay the taxes they are supposed to pay.
How sadly predictable.
Oil Wars
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