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

No. 9308

Sir: I have the honor to refer to my despatches Nos. 929175 and 9295 of September 26 and 27, 1946, respectively, concerning remarks made by Minister of Fomento Juan Pablo Pérez Alfonso in New York on September 25, 1946, to the effect that an excess profits tax would probably be levied in Venezuela, and the local reaction thereto.

El Universal and La Esfera, the two conservative Caracas dailies, continued editorially to criticize Dr. Pérez Alfonso’s statement and the Government policy which seemed to be reflected therein, along the lines taken in the enclosure to my despatch No. 9295. This got under the skin of Minister of Finance Carlos D’Ascoli and his Cabinet colleagues sufficiently so that an 1800-word press release clarifying the Government’s position was given out yesterday and published in this morning’s press. The gist of the apologia is contained in the last three paragraphs of the communiqué, which read as follows, in translation:

  • “1. The Government maintains its promise not to issue a new decree creating a second extraordinary tax; the Minister of Fomento was explicit in this sense in his statement which was published without any alarmist comment or polemics by the press of greatest circulation in the United States.
  • “2. In Venezuela, the highest tax rate on income is relatively very low if it be compared with that of other countries of America and there is no legislation on excess profits. Consequently, there cannot be discarded the possibility that a Constitutional Government, consulting the aspirations of the country, should look for a formula which would permit it to increase permanently the participation of the nation in the revenues of enterprises which obtain excess profits. The two possible means of attaining this object would be to increase the maximum rate of the income tax or to create a permanent and reasonable tax on excess profits.
  • “3. Venezuela does need to increase the revenues it obtains through direct taxation, assessed in such a manner as to conciliate the national need to attract foreign capital with the other one of prompting our own economic development. It does need it because many indirect [Page 1352] taxes should be eliminated and because the present revenues of the Treasury are sufficient to meet routine costs of administration but not enough for the realization of ambitious plans in the fields of communications, production and industrialization of the country.”

Fallacies obvious in the Government’s argument are: (1) that no plans have yet been announced to do away with any of the many onerous and unwieldy indirect taxes which all who have studied its tax structure objectively agree should be eliminated (in fact, in eleven months in power, the present Venezuelan regime has advanced nothing which had any resemblance to a tax reform plan other than to grab some $40,000,000 extra revenue by the decreeing of the income surtax imposed by Decree No. 112 a few hours before 1945 ended); (2) that, although it is true that Venezuela’s income tax is relatively low, total taxation is already higher per capita than in any other Latin American country, and (3) that no thought has apparently been given to the possibility of floating loans, justified by Venezuela’s excellent financial standing, to pay for extraordinary expenditures, the cost of which could thus be spread out over several years, instead of burdening the taxpayer immediately with the expense of long-range capital disbursements.

Respectfully yours,

Allan Dawson
  1. Not printed.