Chile.- The President of Chile, José Antonio Kast, celebrated this Wednesday the approval in Congress of his controversial mega tax and economic reform, a process with which the initiative overcame one of its last legislative obstacles and is now a few steps away from becoming law.
“This reform is one of the most important pieces of legislation to have been passed in the last 30 years. It opens a new stage for Chile’s progress that will bring more investment, more growth, and more jobs for Chileans,” the president stated from the La Moneda presidential palace in a televised national broadcast.
With the approval yesterday of the last remaining article of the mega-reform, the heart of which is the reduction of the corporate tax from 27% to 23%, all that remains is the discussion in both Chambers of the vetoes presented by the Executive to amendments promoted by the opposition and the resolution of the Constitutional Court regarding requests filed, among other points, against tax invariability.
“After more than 10 years of stagnation, with overflowing state spending and public debt at historic levels, the time has come to stop managing mediocrity and recover the greatness of a country that will return, with everyone’s contribution, to being a model for Latin America and a source of pride for all Chileans,” Kast pointed out.
Along the same lines, the head of state highlighted the 2.4% economic growth that Chile recorded in June, breaking a trend of five consecutive months with negative figures.
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“It is the first step of a longer path that will allow us to grow again, to invest and to dream big once more,” emphasized Kast.
The backbone of Kast’s mega-reform, which was approved in both chambers of the legislature with almost the minimum number of votes required, includes a VAT exemption on home purchases, tax benefits for the repatriation of capital, and a controversial measure that guarantees tax invariability or a tax freeze for large investments.
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The three vetoes presented by the Government were approved today in the Finance Committee of the Chamber of Deputies, measures that aim to correct or eliminate the right to financial oblivion for debts; the prohibition of charging interest on interest (anatocism); and the adjustments to guarantee 30-day payment for small and medium-sized enterprises.
The veto is a power of the Executive that forces Congress to re-discuss the observations or indications made by the president, and once both Chambers pronounce themselves on them, the bill can be enacted in its entirety.
The Autonomous Fiscal Council (CFA), created in 2019 to oversee the sustainability of public finances, considered that the project generates a “negative net fiscal impact,” while the International Monetary Fund (IMF) warned that it is an ambitious plan that requires efforts to “achieve deficit and debt targets.”
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For the Government, the approval of the project was key to reactivating the economy and raising Chile’s growth from 2.5% last year to 4% by the end of the term, as well as reducing the unemployment rate to 6.5% and balancing the fiscal accounts.
The Government aims for the reform to be fully approved before September in order to present its first budget by the end of the year.
