Despite declining business activity, an environment that is neither friendly nor attractive to foreign investors, and a heavily regulated economy, tax professionals in Venezuela indicated the market is not gloomy about the future, as one might expect, ...
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Despite declining business activity, an environment that is neither friendly nor attractive to foreign investors, and a heavily regulated economy, tax professionals in Venezuela indicated the market is not gloomy about the future, as one might expect, given an increase in M&A activity in recent months.
"The reason M&A activity is up is probably because people are optimistic that things will change in Venezuela," Elys Aray, PwC's tax leader, said.
If, and to what extent, things change will depend in great part on the outcome of the presidential election scheduled for early October.
Alberto Benshimol, international tax leader at D'Empaire Reyna Abogados, expects "an economic rebound in Venezuela in the coming year."
From a tax perspective, no changes or reform are expected. "Our tax code is up to date. It includes provisions for transfer pricing and worldwide income," Aray said.
Other advisers believe the government will have no choice but to open up to foreign investors, particularly if it wants to increase oil production.
Aray notes China seems to be the country's biggest supporter, investing in oil and construction. Russia is also interested in the country's oil sector, while India and Indonesia are investing on a smaller scale.
On the other hand, opposition leader Henrique Capriles, who will be running against President Hugo Chavez in the October election, has said that he would cancel preferential oil deals Venezuela has forged with other countries should he win the election.
According to a Reuters report, the country's state oil company PDVSA was not paid directly for 43% of the crude it pumped in 2011 because of these preferential deals that enable recipients to buy crude on credit or in exchange for other goods.
"The youthful former state governor [Capriles] named Belarus, Cuba, Jamaica, Dominican Republic, Uruguay, and Argentina as countries that would stop receiving oil on preferential terms," Reuters said.
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