VZCZCXRO7796
PP RUEHAO RUEHCD RUEHGA RUEHGD RUEHGR RUEHHA RUEHHO RUEHMC RUEHMT
RUEHNG RUEHNL RUEHQU RUEHRD RUEHRG RUEHRS RUEHTM RUEHVC
DE RUEHCV #0051 0151512
ZNR UUUUU ZZH
P 151512Z JAN 09
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC PRIORITY 2420
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RUEAHLC/DHS WASHDC
RULSDMK/DEPT OF TRANSPORTATION
RUEABND/DEA HQ WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE
RUEATRS/DEPT OF TREASURY
RUMIAAA/HQ USSOUTHCOM MIAMI FL

UNCLAS CARACAS 000051 
 
SIPDIS 
 
HQ SOUTHCOM ALSO FOR POLAD 
TREASURY FOR MMALLOY 
COMMERCE FOR 4431/MAC/WH/JLAO 
 
E.O. 12958: N/A 
TAGS: ECON PGOV PREL ETRD AMGT FMGT VE
SUBJECT: VENEZUELAN GOVERNMENT MAY RAISE VAT, ALREADY OWES 
USG OVER A QUARTER MILLION DOLLARS IN REFUNDS 
 
REF: 2008 CARACAS 1384 
 
 ¶1. (SBU) SUMMARY: Press reports indicate that the Venezuelan 
government may move to increase the Value Added Tax (VAT) in 
an attempt to raise revenue as oil prices remain low. 
Meanwhile, the Venezuelan government is currently sitting on 
VAT refunds of over USD 300,000 for the US Embassy; Post's 
average wait time for refunds has increased by 63 percent in 
2008 (reftel).  The British have terminated their VAT 
reciprocity agreement with Venezuela.  The Canadian Embassy 
reports it is strongly considering pulling Venezuelan 
diplomats' point of sale tax cards and duty free liquor and 
tobacco privileges in Canada in response to its year-long 
wait for refunds.  On the other hand, embassies with warmer 
relations with the Venezuelan government report receiving 
their refunds in half the time.  END SUMMARY. 
 
¶2. (SBU)  The Venezuelan government continues to examine all 
of its revenue-generating options and is reportedly 
considering increasing the VAT tax, currently at 9 percent, 
in what the Spanish Santander Investments Securities company 
believes would be a highly unpopular move.  In light of an 
anticipated, dramatically reduced revenue stream, the 
government has already proven itself willing to take 
controversial measures when it cut in half the amount of 
dollars it allows Venezuelans traveling overseas in 2009. 
The Ministry of Finance has also shown a renewed interest in 
refining its system of transferring VAT funds instantaneously 
to treasury accounts to try to speed up its cash flow. 
 
¶3. (SBU) At the same time that the Venezuelan government is 
hard at work streamlining the VAT collection process, the 
Embassy continues to experience serious delays in receiving 
VAT refunds.  Delays have gone up by 63 percent from a 
historical average (for the period between April 
2001-December 2007) of 141 days to a current average delay of 
230 days per unpaid submission.  By November 2008, Post had 
requested over USD 300,000 in refunds for the Embassy and 
individual mission members dating back to February 2008 that 
have yet to be paid.  After an informal survey of diplomatic 
community contacts, it seems not all Embassies are 
experiencing the same treatment.  While the Canadians report 
similar delays of approximately a year and the British no 
longer offer Venezuelan diplomats in Great Britain VAT 
refunds, the Honduran Embassy reports that it is receiving 
its refunds within roughly 90 days.  Cuban and Argentinean 
refunds are averaging six months. 
 
¶4. (SBU)  COMMENT: As bilateral relations deteriorated in 
2008, the US Embassy's difficulties with routine 
administrative issues in country, such as VAT tax refunds, 
have increased (reftel).  Embassies with close ties to the US 
seem to be having a similar experience while those Chavez 
views as more sympathetic to his "revolution" tend to enjoy 
more favorable treatment.  In a difficult budget year for 
Post, the Venezuelan government's large, and growing, VAT 
refund tab has become a highly visible example of reciprocity 
gone wrong.  END COMMENT. 
CAULFIELD