The Venezuelan government has authorized a new tax that will apply to foreign money transactions as well as cryptocurrency transactions. The tax, known as the “large financial transactions” tax, was approved by the country’s National Assembly and will collect up to 20% tax on transactions done in currencies other than the country’s fiat currency or the Petro.
The issuance of the tax aims to encourage the use of the national currency, which has lost importance in a multi-currency system such as the one that has existed in Venezuela in recent years. The tax stipulates that any transactions or payments conducted in foreign currencies or cryptocurrencies in an unlimited number would be subject to a charge of up to 20%, depending on the nature of the transaction and the organizations or individuals involved.
The national government will choose the percentage to be paid when the law is officially published, but in its initial implementation, it will collect 2.5 percent on these payments.
Entering the crypto dimension with ‘Petro’
The petro, also known as the petromoneda, was launched in February 2018 by the Venezuelan government.
It was announced in December 2017 and is expected to be backed by its oil and mineral assets to supplement Venezuela’s collapsing hard bolivar currency and allow the government to access foreign funding while avoiding US sanctions. The sovereign bolivar was announced on August 20, 2018, with the government announcing that it will be tied to the value of the petro currency.
Introducing a native currency backed by the government is an idea that is popping out from different countries. Recently India also announced that it would launch its digital currency.
Impact of the tax on Venezuelan investors
According to Jose Guerra, a Venezuelan economist, “this will be a blow to Venezuelans who save their savings in foreign money and cryptocurrency.” The government must acknowledge that foreign money has solved a portion of the country’s cash concerns, as well as everyone’s value reserves and savings. To some extent, crypto assets as well. This choice is an attempt to favor one method of payment over another.
Recently India also announced a whopping 30 percent tax on transactions involving cryptocurrencies. At the same time, Thailand stripped back from its decision to impose a crypto tax.