Venezuela has started collecting its new foreign oil companies windfall profits tax, as part of President Hugo Chavez' plan to gain a larger share of oil company profits, The Associated Press reported.

The tax is based on the monthly average price of benchmark Brent crude oil. The tax kicks in when the price of benchmark Brent crude sits above $70 per barrel, The Wall Street Journal(subscription required) reported. If oil prices remain above that threshold for one month, the state will take 50% of the difference between this average and the final sale price of every barrel. When Brent crude exceeds the $100-a-barrel average, the rate will rises to 60%.

'21st-century socialism'

President Chavez, a Socialist, has said the tax is necessary to fund key social programs as part of his effort to implement an economic and social system he calls "21st-century socialism." Critics say the tax will slow investment and development in the oil sector, and also discourage other foreign direct investment in Venezuela.