The Chargé in Venezuela (Dawson) to the Secretary of State


3. Govt Decree No. 112 dated December 31, 1945 and made public today establishes extraordinary excess profits tax as follows:

Article 1. Taxpayers whose total net profits, calculated in accordance with the provisions of the income tax law, amount to more than Bs 800,000 shall in addition to the taxes provided for in that law pay on such profits of the present year the following extraordinary tax: 6% on that part of profits between Bs 800,000 and Bs 1 million; 10% between Bs 1 million and Bs 1,400,000; 15% between Bs 1,400,000 and Bs 2 million; 20% on all profits in excess of Bs 2 million.

Article 2. The aforementioned tax will be collected solely with respect to the present year and will affect the total net profit without reduction of the amounts taxpayers must pay by reason of the normal ordinary and complementary taxes established in said law. The liquidation and collection of this extraordinary tax will be effected together with that of the income tax and in accordance with the rules that govern that tax whenever they may be applicable.

Article 3. The Acting Minister of Finance is charged with the fulfillment of the present decree.

Preamble to decree affirms that purpose of this extraordinary levy is to better conditions of the people by establishing an Instituto de Fomento de la Produccion to finance development in agricultural and industrial fields, the creation of a banco hipotecario to finance very large scale low cost public housing and the creation of a national merchant marine; that to finance these measures more than Bs billion will be necessary.

Tax will primarily affect petroleum companies and issuance of decree and its applicability to 1945 earnings came as a marked surprise. [Page 1331] Under new schedule payments from petroleum companies alone are very confidentially estimated approximately $30,000,000 in addition to the regular income tax. Embassy will make further analysis and report more fully on (a) estimated receipts under these taxes and principal contributors; (b) effect that such extraordinary sales of dollar exchange may have on present monetary situation; and (c) organization and projected operations of the new Govt entities to be financed by these new revenues; these entities are not yet even in the paper stage.