The Chilean government wants to tax the richest and mining companies
The administration of Chilean President Gabriel Boric Font continued on Friday with its initiative to introduce a revolutionary tax reform, which targets the richest 3% of the population and large copper mining companies.
Chile is the world’s largest copper producer with more than 50,000 tonnes of annual production.
With these changes, the progressive government seeks to collect 4.1% of the country’s gross domestic product (GDP).
The Minister of Finance, Mario Marcel, presented the reform project which must be divided into four bills to be submitted to Congress.
The reform “responds to the idea of a tax pact which contributes to the development of the country, which helps to modernize the tax system, which gives more justice to the system and which is efficient both in the collection and in the use of resources “, according to Marcel.
The economist insisted that “all the studies show that in terms of tax burden, we are below the average of OECD countries in proportions that the OECD itself has estimated at around 8 points of GDP”.
The new strategy includes “a component of taxation of natural persons, income tax, the creation of a wealth tax, the reduction of exemptions, evasion and better control, a new mining royalty and taxes correctors,” explained Marcel.
He added that “mechanisms will be put in place to stimulate productive diversification, productive development, support for SMEs and the development of research and innovation. The royalty will also be directed in this direction, towards the productive diversification of the country, and mining has a very particular territorial base, so part of the resources of the reform of the mining royalty will also go to the regions, as well as to the collection of corrective taxes.
Two of the tax reform bills are due in Congress this month while the others are due for finalization in the last quarter of 2022.
If these measures are approved, it is estimated that in 2023 the collection will reach 0.6% of GDP to gradually increase to 1.8% in 2024, to 3.1% in 2025 until reaching 4.1%.
According to the manager, the idea is to move “from a semi-integrated system to a dual system”.
“For this, we propose to reduce the first category tax from 27% to 25%. It is a difference of 2% which will translate into a development rate for companies of 2% of their profits which they will be able to retain in full if they invest these resources in improving their productivity,” he said. Explain.
“For the distributed profits of companies, a tax on capital income is created with a flat rate of 22%, which will be applied to dividends paid by companies to individuals, and this rate will also be applied to capital gains”, a he also explained.
Marcel pointed out that “a little less than 3% of taxpayers will pay more taxes, and a little less than 97% will not pay more taxes. This is a relevant fact about this reform.
In the case of SMEs, Marcel stressed that “the special regime will be maintained” because “we take very seriously the responsibility of proposing a tax reform of this magnitude to the country”.
“Of course, this is not something we can downplay, and even when those who fundamentally contribute to this greater collection are a subset of the population, our commitment is to the country as a whole, to use well these resources and to show Chileans that the effort made to pay higher taxes will be an effort that is really worth it”, underlined the minister.
After Marcel’s presentation, Boric called on lawmakers to process the file diligently so that the bill would be sent on time, because the goal was “to move forward with greater fairness, with greater equality, in greater social cohesion so that we are all a little more protected.
“These are the social rights, which we seek to finance responsibly with permanent income for permanent expenditure”, underlined the Head of State. “It goes beyond a government in place,” insisted Boric.
With this plan, Boric would seek to bring the country closer to international standards, since Chile is one of the countries with one of the lowest tax collection rates in relation to its wealth of the entire Cooperation Organization and of economic development (OECD). Despite being one of the countries with the highest per capita income in Latin America, Chile is one of the most unequal states with the lowest redistributive capacity in the OECD, given the that taxes manage to reduce inequalities by 2.5% compared to an average of 10% for the group.