The Government presents the tax reform bill that aims to build a fair and developed Chile

On Friday, the President of the Republic, Gabriel Boric, together with the Finance Minister, Mario Marcel, presented the tax reform bill that aims to develop the country and responsibly finance structural reforms, expand social rights such as health care and pensions, and support Chile’s productive diversification, which will put us on the same path as developed countries. 

“This tax reform supports greater equity, greater social cohesion and is not divisive. It improves the distribution of wealth generated by us all and supports social rights,” said President Boric at the presentation at the La Moneda Palace. 

This bill fulfills the Government’s commitment to raise the tax burden and increase tax collection, in order to finance structural reforms while maintaining fiscal responsibility, or a New Fiscal Pact. “I am sure that our presentation today and the forthcoming discussions in Congress will take us one step closer to a New Fiscal Pact that will achieve sustainable, social, economic and environmental development, and above all build a fairer and more dignified country for all,” said the President.

This reform will increase tax collections by 4.3% of GDP when fully implemented. It will close gender gaps, support middle-income sectors, simplify the tax system and improve decentralization in Chile.

The reform will introduce four main changes:

▶ Restructure the income tax system by creating a modern semi-dual system, which stimulates business investment and productivity, while simplifying the entire system. The system’s progression will increase by introducing a new capital income taxation regime, combined with increasing the rates of overall complementary tax levied on the highest employment income, and creating a wealth tax. This will increase the taxes contributed by the wealthiest, while the remaining 97% of taxpayers will not be affected. 

▶ A set of measures aimed at reducing tax exemptions, eliminating loopholes that facilitate tax avoidance, strengthening the ability to combat tax evasion and easing tax compliance for good taxpayers. 

▶ A new mining royalty, which will increase the income received by all Chileans from mining non-renewable resources, such as copper, without discouraging investment and development in this sector. This tax will finance productive diversification within the country and regional governments’ investments in social infrastructure and productive development. 

▶ Corrective taxes aimed at preserving the environment, reducing emissions, developing healthy lifestyles and balancing territorial development.

Legislative initiatives

This tax reform is structured around four legislative initiatives, two of which will be submitted to Congress in July, while the other two will be finalized in the fourth quarter.

The first two refer to the bill that changes the income tax regime, creates a wealth tax, limits exemptions and introduces measures that limit tax evasion and avoidance. The second two refer to changes to the mining royalty bill currently being processed in the Senate.

Social dialogues

This tax reform concludes an extensive analysis led by the Finance Ministry, which carried out an unprecedented social dialog that included public participation. These dialogues were held over a five-week period, from April 19 to June 4, and involved 93 events, such as public hearings and public participation meetings in all regions. They were attended by experts, academics, teams of specialists, representatives of organizations that submitted specific proposals, representatives of social organizations and individuals.

Accordingly, this tax reform was prepared to high technical standards. It analyzed the national experience and compared this to the tax systems of advanced countries. It integrated social and business organizations and was supported by international organizations, such as the OECD.