Tax Reform Project Will be Announced Today
Around 9 p.m. tonight President Sebastián Piñera will present on television the project of tax reform
SANTIAGO – This tax reform plan is supposed to raise resources to fund changes in education and health care. The expectation of the government is that the reform can increase tax revenues to account for around 0.3% of Chile’s GDP.
This morning, the Minister of Finance, Felipe Larraín, affirmed that most of the resources earned with the reform will be invested in Education, to improve the quality of kindergarten and increase the funding of scholarships and loans for university students. Larraín also emphasized that the objective is to increase revenues without affecting the economy.
“This will be a tax reform that seeks equity in a responsible manner. The proposals that seek to increase the collection several times threaten the ability of our economy to grow. We do not want it,” said the Minister at the 46th Assembly of the Inter-American Center of Tax Administrations.
The government also committed to including on the tax reform project a proposal to avoid the increase on the prices of fuels. One option would be to create a flexible tax that could help deal with the international volatility of fuel prices. This was one of the points that the opposition required to be included in the project. Many UDI parliamentarians conditioned their support of the project to the inclusion of a proposal to reduce the taxes on fuels.
PPD senator Ricardo Lagos Weber questioned if the resources that the government wants to raise with the reform will be enough to make the investments that are planned. According to the parliamentarian, “The amount will barely be sufficient to cover our commitments.”
The senator Lagos Weber also emphasized that the project needs to reduce class differences in Chile. “Progressive tax collection improves income distribution in all OECD countries. However, our tax system works in exactly the opposite way. Before taxes, the richest 20 per cent earns 17 times more than the poorest 20 per cent. After taxes, that gap increases to about 20 times,” affirmed the senator in an article published on the Senate website.
UDI senator Víctor Pérez Varela also proposed that the tax reform should improve the distribution of resources among the regions in Chile. “We have advanced the process of regionalization with more powers, but also with more resources and opportunities. Therefore, tax reform is the option that encourages investment in the provinces,” affirmed Pérez Varela in a communicated released by UDI.
The senator said that some regions suffer from high costs for almost all products due to the high prices of transport and fuels, and proposed that some taxes can be different depending on the place. “We need to know the tax reform proposal better, but certainly we will defend the interests of the middle class and the most vulnerable people,” he declared.