First modification:
The project, one of the bastions during the politician’s campaign and necessary to carry out social policies, did not get the necessary votes for its approval. The goal was to raise around 10,000 million dollars in the coming years, but the right-wing bloc criticized the tax increase for the country’s wealthiest, citing the risk of low investment.
This Wednesday, March 8, the Government of Chile received a severe blow to its projections in at least 2023: the Chamber of Deputies did not give the green light to the tax reform, one of the most repeated arguments by Gabriel Boric during his campaign presidential office and a cornerstone for the implementation of social policies.
The proposal did not pass the Lower House as it did not reach the 78 votes necessary to advance. The contest had close results, with 73 votes in favor and 71 against. While there were three deputies who abstained and eight who did not attend the session, among which were some pro-government supporters of the government coalition.
The controversial tax reform aimed to pocket 3.6% of the national GDP, an equivalent to around 10,000 million dollars in the next four years. It was necessary money for the execution of public and social policies.
Now, after eight months of negotiations, the steps of the project must be restarted from the beginning in a year and the Executive will not be able to propose similar initiatives. An alternative that does not seem to have many possibilities is to present it through the Senate – the ruling party does not have a majority there either – with some variations.
⭕️With 73 votes in favour, 71 against and 3 abstentions, the Chamber generally rejects the draft #Tax reform.
– Deputies and Deputies of Chile (@Camara_cl) March 8, 2023
Finance Minister Mario Marcel was critical of the opposition bloc and warned that this would have negative consequences for retirees and women, two groups that would benefit from better conditions.
“Today the parties furthest to the right of the political spectrum will celebrate, we have seen that those who evade taxes and advise taxpayers to do so will celebrate,” he attacked. But Marcel advanced that they will return to the charge in 2024: “They will have one more year to use the tax avoidance mechanisms,” he said.
The official expressed his regret for “the citizenry” and affirmed that they will reevaluate the situation with the president “to continue with the government’s agenda.”
What was Boric’s tax reform about?
The administration of the leftist leader wanted to increase Chile’s tax collection. According to data from the Organization for Economic Cooperation and Development (OECD), the trans-Andean nation was below the average for tax credit in Latin America (21.9%), with 19.3% in recent years.
In this logic, the Government sought to increase taxes, which covered 3% of the population to correct the great inequality gap that exists in the territory.
The objectives were aimed at four different fronts: measures against evasion and avoidance, modernization of tax procedures, changes in tax bases or rates (this item included a tax on high net worth) and benefits for taxpayers.
The project included the restructuring of the income tax, a reduction of exemptions and a new royalty and corrective taxes on mining.
? #Tarde | Minister Marcel: “In this way, the idea that there is a tax reform was rejected, that the resources generated by this reform would finance the increase in the PGU, the reduction of waiting lists, that a system of care”. pic.twitter.com/T4W4xpGSvq
– Chile (@CChile) March 8, 2023
The Government listed that this change was necessary to finance the increase in the Universal Guaranteed Pension, strengthen the overcrowded health system and the development of green policies.
In recent days, the opposition had predicted its disagreement with the project, alleging that the policies “could not be worse”, in the words of the head of the Independent Democratic Union (UDI), Guillermo Ramírez.
The wealth tax was one of the most discussed issues during the negotiations between both parties, which caused disagreement in the business sector. The intended regulations established a contribution from the owners of assets that exceeded 4.9 million dollars and lived in Chile.
Those who did not agree with this idea argued that it could harm investments and the ability to save.
In addition to the composition of the reform, the opposition also criticized the moment in which the ruling party tried to include the modification, after the GDP growth projections were lowered until 2027.
The conservative UDI deputy, Juan Antonio Coloma, asserted that the refusal to reform is a consequence of the “stubbornness” of the government, which he accused of “not being willing to really sit down and talk.”
“The rejection shows that it is not only from a political sector, it is from who we are from the right and also from the center,” he closed.
With EFE and local media
