Tax reform would seek to overcome economic difficulties in Venezuela
Juan Carlos Apitz Ardizzone, member of the Intelinvest professionals team, believes that this vision of the Executive and the announced tax changes can face complications in the international market
As part of the restructuring of monetary policies, Nicolás Maduro and the National Constituent Assembly are promoting a tax reform that will charge a tax between 5% and 25% on transactions in foreign currencies and crypto assets, thus being informed in a not very specific way. Juan Carlos Apitz, a member of the staff of professionals of Intelinvest (Casa de Valores), spoke about this tax that will levy the transactions of goods and service provision, after the slight increase in its demand in recent months, with the purpose of clarifying and to expand on the subject, from a strictly professional perspective. As Apitz emphasizes, the aforementioned reform would seek to overcome the difficulties encountered by the national president’s cabinet in two specific areas.
Cryptocurrencies and foreign currencies
In the first place, the announcement – which could be known after a press release and revelation published by Bloomberg – involves the goods and services that are traded today in the Venezuelan economy with a particular consideration regarding petro. According to the government itself, all transactions made using cryptocurrencies will be susceptible to the aforementioned tax, except the national cryptocurrency petro. This incentive, Apitz notes, seeks to reduce transactions in dollars, euros, Colombian pesos, bitcoin and ethereum to give more attention and preponderance to the cryptocurrency that the Executive is trying to position.
After months of hyperinflation, depreciation of the bolivar and a continued economic recession, an alternative monetary mechanism can lead to an incredible pressure on the exchange rate, according to Apitz. However, “the petro competes against more stable monetary instruments and with wide recognition in international markets.“
The dollar, mainly, is tied to the expectations of Venezuelan merchants for its robust ability to stabilize the value of transactions and its widespread acceptance in international trade. For decades, Venezuelans’ relationship with the dollar has played a leading role in consumers expectations.
The petro has not had the golden path of the most popular cryptocurrencies in the digital ecosystem. The sanctions of the United States, the darkness surrounding its technological development and the technical difficulties that have slowed its implementation again and again condemn the petro to be an alternative monetary instrument with very limited opportunities in international markets.
No foreign investor or consumer considers the petro to be a reliable or apparently interesting cryptocurrency, says the interviewee. “By being encircled in the Venezuelan market, the dollar and other instruments are positioned much better to relieve pressure on the exchange rate, and remove any possibility of the national market changing its expectations regarding the value of goods and services,” he adds and explains.
Will it slow inflation?
Secondly, the Venezuelan government has had to substantially cut on public spending to relieve inflationary pressure. When this expense occurs after an expansion of the money supply, inflation levels tend to increase. However, this tax reform increases the availability of resources for certain social policies without the customary increases in the money supply, which provides greater slack to the Venezuelan budget without counteracting the effects of monetary easing measures.
In the opinion of Juan Carlos Apitz, Alternative Markets Manager of Intelinvest Casa de Bolsa, although the efforts of the National Constituent Assembly are destined to an economic recovery at the expense of the rest of the countries of the international community, an artificial increase in consumption does not mean much in the long term if the objective is to increase the productivity of the Venezuelan economy. In fact, given the profound debacle that all sectors of the economy have experienced, a true recovery must have the support and confidence of various actors of the nations, whose skepticism regarding the economic policies of the Venezuelan president persists, concluded the expert.
M.Pino
