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Venezuela's SENIAT: Efficiency and autocracy

From | VenEconomy

28.10.05 | This week, the Seniat reached new extremes and moved into new areas in its determination to mete out sanctions. It closed the daily newspaper El Impulso for 24 hours and fined it Bs.28.3 million for invoicing irregularities in 2002. It also, surprisingly, sanctioned PDVSA-Gas, an affiliate of the Venezuelan state-owned oil company, with fines of Bs.150 million for failing to comply with its tax obligations and with the closing of its administrative offices for 48 hours, besides notifying the company of a tax claim filed in connection with Bs.500 billion withheld in VAT and not handed over to the National Treasury.

While the amount of the claim for Bs.500 billion is the highest applied by the Seniat to date, the fine will have no major consequences because the money will stay in the family (read the public sector). The issue here is that the fact that PDVSA-Gas has issued unauthorized invoices, has failed to comply with buy-sell requirements, and has been behind with its tax obligations since 2001 confirms the wide held perception that PDVSA has become inefficient.

If the purpose of the sanction was to demonstrate that no one is beyond or is exempt from the sanctioning arm of the Seniat, then the point has been made. All companies, small, medium-sized or small, in whatever sector, and regardless of their type of business, can expect a tax audit. The Seniat will be knocking on their doors. It has become clear that this is inevitable.

What worries VenEconomy about this “efficiency” on the part of the Seniat is that the vast majority of the closures are conducted without respecting the affected party’s right to defense and that the punishments are out of proportion to the infringements in question.

In most cases, a defect or mistake in just one invoice over a period of several tax years leads to the closing of the business. Closing stores and companies implies not only high economic costs but it also has a negative impact on the image of these concerns in the eyes of their customers, suppliers, and business associates.

What is most worrisome is that the Seniat’s “efficiency” is not limited to closing establishments and adverse publicity, there have also been cases of claims of tax irregularities being filed that have no legal basis, such as those filed against service contractors in the oil sector. These contractors were arbitrarily and illegally classified as “oil companies” and this classification was applied retroactively with the subsequent filing of multimillion tax claim. Worse even than these tax claims is the Executive’s threat to disqualify companies who defend themselves legally (those who take their cases to the competent courts of arbitration, for example) from taking part in bidding on future work projects. Efficiency without respect for the rule of law equals autocracy.

And for those who still admire this “efficiency” of the Seniat in its compulsive collection of taxes, suffice it to recall that Benito Mussolini managed to get the trains running on time.

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