PRIVATE TV OWNERS DECRY NEW GOV TAX

C O N F I D E N T I A L CARACAS 001090

SIPDIS


USCINCSO ALSO FOR POLAD
NSC FOR CBARTON

E.O. 12958: DECL: 03/31/2014
TAGS: KDEM KPAO PGOV PHUM VE
SUBJECT: PRIVATE TV OWNERS DECRY NEW GOV TAX


Classified By: Ambassador Charles S. Shapiro; reasons 1.4 (B) and (C)

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Summary
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1. (U) National tax collection agency SENIAT has ordered
Venezuela's four leading television channels to pay SENIAT
almost USD 3.3 million in taxes for allegedly donated spots
during the December 2002-February 2003 opposition-sponsored
national strike. Globovision, RCTV, Venevision, and Televen
owners and legal executives assert that their respective
channels have paid all required taxes and that the Venezuelan
government (GOV) is punishing the media for criticizing the
GOV. The stations will appeal the SENIAT orders based on
legal arguments that the spots were public service
announcements, not donations, and thus exempt from taxes on
donations. Some business and media executives believe SENIAT
probably has a case. That said, everyone understands that
the GOV is both punishing the opposition private media and
issuing them a warning. End Summary.

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Fair Tax, or a Tax on Freedom of Expression?
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2. (U) On March 19, Venezuela's national tax collection
agency, SENIAT, ordered Venezuela's four leading television
channels to pay SENIAT almost USD 3.3 million in taxes
(exchange rate BS 1,920 per USD). SENIAT claims that these
new taxes are for a number of spots the channels donated to
the opposition during the December 2002-February 2003
opposition-sponsored national strike. SENIAT is taxing
national 24-hour news channel Globovision the equivalent of
USD 1.1 million; Radio Caracas TV (RCTV) USD 1.0 million;
Venevision USD 781,000; and Televen USD 302,000.


3. (C) Globovision, RCTV, Televen, and Venevision
executives assert that SENIAT's motives are political, a
response to direct orders from President Chavez and
Communication Minister Jesse Chacon to bankrupt these
opposition-leaning stations if they refuse to toe the
Venezuelan government's revolutionary line. On March 19,
RCTV President Marcel Granier accused the GOV of attempting
to quash freedom of expression through the imposition of
illegal and unfair taxes. RCTV Legal Vice President Oswaldo
Quintana told IO on March 22 that the GOV was trying to
impose a non-existent tax against political pluralism,
specifically to discourage any messages against the Chavez
government. Globovision manager Edith Ruiz opined that the
SENIAT order was a tax on the freedom of expression.
Televen's Corporate Vice President Enrique Alvarado blasted
the SENIAT decision, terming it an unabashed political
maneuver directed at pressuring the private media to stop
supporting the opposition. Venevision's Legal Vice
President, Maria Ines Loscher, echoed Quintana's assertion,
adding that this was the GOV inquisition's latest step
against the media.


4. (C) All four stations will appeal the SENIAT orders.
According to Loscher and Quintana, the spots the channels
provided were public service announcements, not donations,
and therefore exempt from taxes on donations. Further, if
SENIAT were to insist that the spots were donations, while
donations of material goods are subject to additional
taxation in accordance with Venezuela's 1999 Law on
Inheritance and Donations, donations of services are not
taxable. Even in the worst-case scenario, in which SENIAT
persisted in terming the spots donations, and it ignored the
fact that the spots were services rather than goods or
property, according to the 1999 law, the recipients, not the
donors, are expected to pay taxes on donations received,
argued Quintana. (Comment: Quintana also acknowledged,
however, that the donor must pay the donation tax if the
beneficiary cannot pay it. End Comment.)


5. (C) According to Quintana and Loscher, SENIAT employees
had started investigating the four channels about eight
months ago, so this latest GOV maneuver did not come as a
surprise. Loescher explained that these spots had no
commercial value. Venevision granted the airtime in large
part because few companies placed paid ads on TV during the
strike. Following SENIAT logic, announcements calling for
blood or medicine donations would also be subject to
taxation, opined Alvarado. Further, to the station

executives' knowledge, SENIAT was not applying the same tax
guidelines on state television stations Venezolana de
Television (VTV) and VIVE TV; more reason to believe SENIAT's
motives were political.


6. (C) Globovision executive Edith Ruiz noted that the
channels had also provided hundreds of hours of airtime for
the GOV's public service announcements. These included spots
on the constitutional and constituent assembly referendum
processes; for the national children's Foundations (Fundacion
del Nino); national vaccination campaigns; Ministry of
Defense social programs, among others. SENIAT had not
imposed a donation tax on any of these pro-GOV spots, claimed
Ruiz. To Quintana, it was clear that the GOV was exclusively
targeting public service that it considered pro-opposition,
including an hour-long December 2002 Mass for Peace during
the height of the national strike.

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Another Perspective
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7. (C) Though television owners and executives were
unequivocal in their assertions that these spots were public
service announcements, not donations, and that there was no
law that imposed a tax on public service announcements,
national phone company CANTV President and former Education
Minister Gustavo Roosen told Ambassador March 19 that if he
were SENIAT director, he would go after media owners for the
value added tax (IVA) on the donated ads because the law is
quite clear on this point, and has been since he was a
minister some 15 years ago. Owner of national daily "El
Universal," Andres Mata told Ambassador sometime after the
national labor strike ended in February 2003 that that he had
been careful to pay the IVA on ads he had given to the CD
because it is the law. He also noted that many of his fellow
media owners were not doing the same and he told Ambassador
that it was a mistake that would open them up to legal action
since it quite clearly was the law. "El Universal" editors
told IO March 24
that the TV channels were skating on thin legal ice,
especially in light of the current government's campaign to
find whatever means to subject the private media to its
revolution. Though the papers, including "El Universal,"
were less likely than broadcast media to provide free space,
when "El Universal" did so, as a precautiona>1#:QfJo
appeal. Even with an appeal, however, the channels could be
subject to fines of up to 100 percent of the quoted tax
value, plus interest. In Venevision's case, the total
"damage" could reach almost USD 2 million. Even worse, if
the channels lose their appeals and pay, it will set a
dangerous, unaffordable precedent because the GOV is sure to
then impose taxes on the channels for all free or donated
spots over the past five years of the government. Further,
the GOV could apply the same tax regime on regional
television channels, private radio stations, and print media,
and ultimately, Venezuela's Organic Tax Law would permit the
GOV to seize the assets of delinquent channels, warned
Alvarado.

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Comment
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9. (C) While the lawyers argue over the legality of this
tax bill, it is clear that the GOV perceives these four
channels as part of what they term a "conspiracy" against the
government, and the GOV will use every means possible to try
to intimidate these channels. So far the GOV has stopped
short of censorship or talking the channels off the air.
These tax bills are warnings. For now, this most recent
threat appears to have made station owners and executives
even more determined to continue allowing ample space for the
opposition's views.
SHAPIRO


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2004CARACA01090 - CONFIDENTIAL