Dr. Jan Cademartori anticipated that the rejection of the idea of legislating has a direct impact on the country’s growth, which is why inequalities continue to grow in all areas.
Communications UA.- The rejection in the Chamber of Deputies of the idea of legislating the Government’s proposal for a new Tax Reform for the country, puts on hold all the social plans that were incorporated into the government program that require permanent financing.
To learn more about how this action impacts the country, we spoke with Dr. Jan Cademartori, an academic from the Department of Commercial Engineering of the Faculty of Engineering of the University of Antofagasta, who described its implications.
What did it mean that the idea of legislating the Tax Reform proposal in Congress will be rejected?
The idea of legislating allows opening the debate to analyze the different points contained in a reform. In this case, with the rejection of the proposal, there are no options to discuss the content of the document, at least for one year.
It should be noted that this reform was contemplated to be carried out gradually over 3 years.
Is there a possibility that, before that date, it can be legislated again?
It is very difficult, because now it should be presented in the Senate, for which a quorum of 2/3 needs to be met to approve it and for that to happen the Government must reach an agreement with the opposition political parties.
What were the main financing points contemplated by the Reform?
The project contemplates several points, the first and that almost half of the articles, has to do with attacking tax evasion or tax avoidance. A second item is the disintegration project, and a third has to do with a higher tax on mining companies (and that is a minor part of the proposal). Further background can be found in https://termometro.cl/2022/10/23/columna-reforma-tributaria-gobierno-presidente-boric/ubil
What is the impact that the rejection of this Reform proposal has for the country?
The Tax Reform considered collecting 4% more of the Gross Domestic Product (GDP) than what is currently received from taxes, which is 24% of GDP, so we would have reached 28% of GDP, which would allow finance strategic lines for the country, such as education, health, citizen security, strengthening the carabineros and police force, social projects, among others, which in turn would increase the country’s economy.
It should be noted that these milestones are important to be considered in a Tax Reform, since they require more permanent financing and do not depend on macroeconomic cycles.
Just to mention that Finland collects more than 40% of taxes on its GDP and has a transport, education, health system, among others, that is enviable for the rest of the countries in the world.
What social projects were affected by the rejection of the Tax Reform proposal?
Some of the examples that were considered in the social field are the Universal Guaranteed Pension for people who have already retired and that it considered raising it to $250,000 pesos. Aid to finance families that incur care expenses for people who are not self-sufficient, that is, people who have special needs, as well as finance rents of around $450,000, given the large housing deficit and the high cost of these .
What other areas were considered in this proposal?
Financing and reinforcing spending on technological innovation, where we have a tremendous deficit, which allows the country’s economic growth in this way. Chile today spends 0.4% of the gross domestic product on everything that is innovation and technology, which considers state spending with private ones.
Just mention that the countries of the Organization for Cooperation and Development (OECD) are like 3%. We are light years away from what should be spent in order to promote and develop the economy so that it does not continue to depend on non-renewable natural resources.
What happens with the Mining Royalty Bill that is included in this Reform, but is implemented in a separate lane and has already passed through the Chamber of Deputies?
This initiative was reviewed by the Mining Commission of the Senate and now it has to be reviewed again by the Finance Commission. Then he must go to the Senate room and there he could see the light. If the Royalty is accepted as it is in the Senate, it would be 0.6% of GDP more than what is collected today.
This project is important for the area where we are, because it establishes that a part of the funds that are collected must go to the mining communes, that is, where the communes of the Antofagasta Region are located. Another part is assigned to the other communes of the country, except those communes that do not depend on a community support fund; and another part to the regional governments.
Under the current legislation, how is the tax paid by mining companies?
Today the mining companies pay a specific tax that is low considering their profits. Those funds are invested in innovation. Another alternative for the Government and that can be effective, is the control of the taxes that exist for mining, that is, that they are paid, because the legislation is ambiguous regarding the content of the minerals that are exported, since they contain many other precious minerals and that are not rigorously examined. There we can find millionaire resources. In this sense, the Customs Service plays an important role.
One of the financing points you mentioned refers to attacking tax evasion or avoidance, what does this mean?
It refers to not paying taxes, violating the letter of the law, that is called evasion. When these are surreptitiously violated, violating the spirit of the law, it is called circumvention. For example, a mining company borrows excessively, not because it lacks money to finance its project, but because that will help it pay less tax. Another case is when a person inherits many resources, takes certain assets and passes them on to relatives or people they know with the aim of appearing with less income or fewer assets or to directly avoid the tax paid on inheritances.
Is there a cadastre of what is the percentage of tax evasion currently in the country?
In Chile there is a very high percentage of tax evasion, there are studies that make it known and show that people with higher incomes pay a lower percentage of taxes in relation to a person who earns less.
There are tax experts who know the thousand ways to avoid when it is done using the loopholes or gaps that the law allows.
In the rejected proposal, there was a whole series of measures that regulated this, giving more power to the internal revenue service to directly investigate people’s checking accounts, among other actions.
What were the measures to regulate the payment of taxes in the reform?
In general, tax systems promote what is called tax progressivity, which means that the more you earn, you pay a higher percentage of your income. Here in Chile there are studies that have shown that it is the other way around, for this very reason, within the measures that were proposed, was to place a tax on the very, very rich, those who have assets greater than 4,400 million pesos, in the country There are approximately 6,000 people who have been able to detect that they have this patrimony, so in this reform it was proposed to place a 1% tax on that patrimony, which is not much.
Did you mention that another point of financing that this Reform had is the disintegrated systems project, what do you mean by this?
Until the Bachelet government, Chile had an integrated tax system, which means that when companies pay their taxes and then the owners of those companies have to pay their taxes, an important part of what their companies have already paid is deducted. , that is, one tax depends on the other. We currently have a semi-integrated system, which is that a mere part of what the company had paid was deducted from what the owner had to pay.
In the new Reform, the disintegrated system was contemplated, which is that companies have legal personality independent from their owners, so what the company pays is one thing and what the owners pay is separate. This innovation would make it possible to catch up with world practices.
What is the current state of collection in the country?
Chile today globally collects 24% of its gross domestic product from taxes. If we compare ourselves with the OECD countries of which we are members. The OECD average is 34%, together with Mexico we are one of the lowest.
Were these financing mechanisms specified in the project?
It is that legally what is declared is a will, because in turn each of these projects have to be approved separately. Because you have to define your objectives, you have to detail, and there you have to return to Parliament. So when tax reform projects are presented, wills are expressed, but once the resources are available, the other initiatives that I mentioned can be implemented.
