Venezuela Strikers in Tax Revolt, Chavez Defiant

— By Pascal Fletcher

CARACAS, Venezuela (Reuters) - Foes of Venezuelan President Hugo Chavez, marching in their thousands in Caracas, tore up income-tax forms on Tuesday as they added a tax revolt to a five-week-old strike crippling the nation's crucial oil exports.

But the leftist former paratrooper, who survived a coup in April, vowed to resist what he called their "economic war" to oust him as president of the world's No. 5 oil exporter.

Waving national flags and blowing whistles, the anti-Chavez demonstrators marched to government tax offices in east Caracas on the 37th day of an opposition strike aimed at forcing the populist leader to resign and call early elections.

The grueling shutdown has strangled Venezuela's oil output and shipments, jolting world oil markets and bleeding government coffers of millions of dollars a day of oil income.

"We are not going to pay taxes until this government goes," 52-year-old housewife Belkis Soto told Reuters as she took part in the march. Many protesters, who include middle class professionals, housewives and students, waved tax declaration forms, which they ripped up outside the tax offices.

The opposition, which has accompanied the strike with almost daily street protests, has called on individuals and firms to stop paying taxes, whether income or sales taxes.

But Chavez, who led a coup attempt in 1992 and was elected president six years later, is refusing to quit.

"We are in a situation of economic and political war because that is what the opposition wanted. ... Let's give them war then," he told reporters in west Caracas.

Earlier, speaking at a school, he warned his striking opponents their refusal to pay taxes was against the law. "They've tried to break the oil industry ... now they're trying to break the national treasury so there is no money," he said.

Tax authorities say offenders face fines and prison terms ranging from six months to seven years.

As a result of the strike, the government is reducing by half its original 2003 growth forecast of 2.5 percent to 3.5 percent. It has said it will announce tough belt-tightening measures to offset the strike losses.

"READY FOR THE WORST"

But Chavez seems determined to fight back. He purged the armed forces of opponents following the short-lived coup against him in April. He is doing the same with the strike-hit state oil giant PDVSA, the motor of the Venezuelan economy.

"I'm ready for the worst and on any front, we'll defeat the enemies of the nation," he said.

Despite calls from some opponents for the armed forces to topple Chavez, or at least refuse to obey him, Venezuela's army commander told Reuters on Monday the army would not intervene in the crisis and backed a negotiated political solution.

Tensions have been high since clashes on Friday between pro- and anti-Chavez protesters, in which two supporters of the president were shot and killed. The deaths triggered a storm of accusations between the government and its foes.

Police in La Guaira, a port just north of Caracas, fired tear gas on Tuesday to keep apart feuding followers and foes of the president.

Chavez's opponents say the left-wing policies of his self-proclaimed "revolution," which include a nationalistic oil policy and increased state intervention in the economy, are dragging the country toward ruin and Cuban-style communism.

The strike gripping the oil industry has disrupted oil shipments to the United States, which normally obtains more than 13 percent of its crude imports from Venezuela.

"VENEZUELA THE LOSER"

"At the end of the day, Venezuela is going to be the loser in this if it doesn't resolve this because we'll buy our oil someplace else," a senior State Department official, who asked not to be named, told reporters in Washington.

Oil prices, which rose close to two-year highs last week, fell heavily on Tuesday as leading OPEC heavyweight Saudi Arabia pushed the oil exporters' cartel for a hefty oil output increase to fill a gap left by the Venezuela strike.

The government insists strike-hit oil operations are being restored to normal. Striking executives in the state oil giant PDVSA, many of whom have been fired, deny that.

Energy Minister Rafael Ramirez said on Tuesday that PDVSA would be restructured because of the conflict and also to reduce its high administration costs. The transition would decentralize PDVSA away from Caracas to two operations in the west and east of the country.

Potentially adding to the problems from the oil strike, Venezuela's bank workers said they would decide this week on a proposed 48-hour halt to all banking operations.

The opposition is setting its sights on a Feb. 2 referendum scheduled by electoral authorities to vote on Chavez's rule. But the poll is nonbinding, and the president, whose term is scheduled to end in early 2007, has said he will ignore the results, even if he loses massively.