US embassy cable - 04CARACAS1090

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