Economy of Venezuela

Exports and Imports

Venezuela's exports have significantly declined in recent years, reaching $4.3 billion in 2022. Scrap iron, petroleum coke, and crude petroleum are the top exports, mainly going to China, Turkey, and the United States. Imports, on the other hand, are dominated by China and the US, with a focus on manufactured goods and food.

Balance of Trade

Despite the decline in exports, Venezuela maintains a positive trade balance. This means the value of their exports exceeds the value of imports, though by a much smaller margin compared to the past.

Infrastructure Development

Infrastructure development in Venezuela faces challenges. Road quality suffers from a lack of maintenance, and overall investment has declined. The total road length is estimated to be around 100,000 kilometers, but many require repairs and upgrades.

Fiscal Policy

Venezuela's government spending exceeds its tax revenue, leading to a budget deficit. This is partly due to lower oil revenue and economic hardship. The government attempts to cover the deficit through printing money, contributing to inflation.

Monetary Policy

The Venezuelan Central Bank struggles to control inflation, which has reached hyperinflation levels in recent years. They have implemented policies like raising interest rates and currency devaluations, but these have had limited success.

Trade Agreements

Venezuela has trade agreements with several countries, including some members of the Caribbean Community (CARICOM) and the Southern Common Market (MERCOSUR). However, recent economic and political issues have limited the effectiveness of these agreements.

Environmental Regulations

Venezuela has environmental regulations in place, but enforcement can be weak. Issues like deforestation and oil spills remain a concern. There is a growing focus on environmental sustainability, but significant challenges need to be addressed.

Tax System in Venezuela

Corporate tax rate: The corporate income tax rate in Venezuela is progressive, with the highest bracket reaching approximately 34% for taxable income exceeding 1,500 Tax Units (TU). It's important to note that the value of the TU was recently increased in 2023 to VES 9 (Venezuelan Bolívar Soberano).
Sales tax: Venezuela uses a Value Added Tax (VAT) system with a standard rate of 12%. However, an additional tax rate of 5% to 25% applies to goods and services paid for in foreign currency, cryptocurrency, or certain assets.
Property tax: Property taxes are levied by municipalities and generally considered low. Rates may vary depending on location and property value.
Payroll tax: Venezuela has a payroll tax that funds social security and other social programs. The exact contribution rate can vary depending on the employer and employee categories.
Tax deductions and credits: Deductions and credits are limited in Venezuela, offering less flexibility in reducing tax burdens compared to some other countries.
Tax compliance: Challenges exist with tax collection and enforcement in Venezuela. This can be due to factors like a large informal economy and administrative hurdles. The government is making efforts to improve compliance, but progress is slow.
Tax burden: The overall tax burden in Venezuela is considered high. This is partly due to inflation and the economic situation, pushing effective tax rates higher than intended. Additionally, the recent increase in the TU value can also impact the tax burden for some taxpayers.