831.6363/12–2746

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

confidential
us urgent

602. Oil producers were summoned Presidential Palace this a.m. and told Junta sending proposal to Constituent Assembly amend income tax law. Ordinarily tax last year case oil companies 22½ percent, surtax 9½ percent, decree 112 special levy 20 percent, total 32. Under amendment ordinary tax to remain same while surtax increased on sliding scale up to 26 percent, total 281½. However when earnings exceed 14 million bolívars small tax deduction allowable on part of earnings above that amount which are reinvested here. Due this provision Creole expects pay overall effective tax approximately 26 percent but because increased production and prices estimates total amount payable by it will be $33,000,000, and amount payable by rest of industry approximately same.

Proposal expected go assembly this p.m. and be passed tonight or tomorrow. Tax increase then being law will be permanent one unless subsequently amended.

Dawson