Squeezed by declining oil revenue, Venezuela is trying to do something it hasn't worried about for years -- collect income taxes.
The government is scrambling to raise additional revenue because of a forecast drop in the price of oil, the country's main income source, and because powerful constituency groups won't allow spending cuts.
The solution is not to raise taxes, but simply to collect them by cracking down on widespread tax evasion.
The problem began in the 1970s when the Venezuelan government allowed its once highly regarded tax system to fall into disarray as oil prices rose, leaving the country awash with revenue.
"The government figured oil provided all the money it needed, so it didn't need to worry about taxes anymore," said Farid Antakly, a Caracas tax lawyer.
The government froze salaries of tax-department officials and refused to replace worn-out office equipment.
"All of the best workers left," said Francisco Garcia, director of Venezuela's tax department, who was a junior staffer there in the 1970s.
"Those who were left put tax returns in a basement to rot and threw away letters from taxpayers seeking assistance," Garcia said. "Tax officials also took bribes to reduce assessments."
Taxpayers responded by simply not filing their returns or by paying much less than they owed.
"Venezuela was a tax paradise," said Rafael Neltran, a Caracas accountant.
The country is still a taxpayer's delight. While the government collects $1 billion in individual and corporate income taxes each year, tax evasion costs it another $1 billion, according to Garcia.
Only 1.5 million of the 2.5 million taxpayers who should file tax returns actually do, he says.
Income taxes will provide about 15 percent of the government's 1986 budget of $7 billion. Oil provides 60 percent of the government's income and accounts for 90 percent of export revenue.
Oil income, which has dropped steadily since 1984, is expected to fall another $2 billion this year.
Venezuela cut the price on its primary grades of heavy crude oil by as much as $1.30 a barrel on Jan. 10 in response to similar price cuts by Mexico the week before.
Two decades ago, Venezuela had a model tax system among third world nations, one that a group of American tax reformers led by a Harvard professor designed in a 1959 trip here.
Garcia is trying to reestablish the tax department's former status. He has fired 50 workers for corruption and replaced them with auditors. The auditors are aggressively examining tax returns of big companies and the wealthy, believed to owe billions.
It's an open secret that large companies regularly have divided themselves into as many as 20 smaller firms on paper in order to qualify for a lower tax rate.
Another popular tax dodge has been to funnel funds through dummy companies in neighboring tax havens, such as Panama and the Netherlands Antilles.
While the nation's economy grew rapidly during the 1970s, income tax revenue remained constant.
But through the improved collection practices, income tax revenue has doubled since Garcia took over in February 1984 under the administration of President Jaime Lusinchi.
Income-tax audits last year produced additional taxes of $1.3 billion, compared with $60 million in 1983.
Garcia admits he can only do so much. Of the one million taxpayers who don't file returns, he estimates at best only 200,000 can be brought on to the tax rolls, which would raise another $400 million dollars.
A majority of the tax evaders are low-income people who are not part of the mainstream economy.
"Venezuelans lack tax consciousness," Beltran said.
Venezuela's Congress has also tied the tax department's hands. With the government trying to hold down spending, Congress refuses to hire more tax auditors, even though Garcia argues that each auditor would more than pay his salary with the extra revenue brought in.
While many big corporations and wealthy taxpayers are complaining about the tax department's crackdown, tax lawyers and accountants are not.
"Business has really grown in the past couple of years," said Francisco Gonzalez, a tax lawyer with Touche Ross International in Venezuela.