Santiago – The Chilean Chamber of Deputies yesterday rejected the tax reform project presented by the government of leftist Gabriel Boric, which constituted the pillar of its ambitious social reform plan.
“We believe that it is bad news for the country,” said the Minister of Finance, Mario Marcel, after the vote in which by a narrow margin of 73 votes in favor, 71 against and three abstentions, the initiative was rejected, which to be approved, it required a majority of wills among the total number of legislators present in the room.
The project was rejected with the votes of the opposition right. But it was the absence in the room of three left-wing deputies that prevented the government from adding enough votes.
Through this reform, the Boric government sought to collect the equivalent of 3.6 additional points of GDP to finance the implementation of the expansion of the country’s social protection system, with greater coverage in the area of health, education and pensions.
The project included a restructuring of the income tax, tax exemptions, a new mining royalty and an increase in taxes on the highest income.
After this rejection, the government must wait a year to present a similar initiative. But since the original project was presented a few months after Boric took office, his government has enough room to propose a new initiative and try to approve it in this presidential term.
“What we have had in this vote is that ideology prevailed over pragmatism. Ideology prevailed over dialogue,” Marcel said.
The tax reform promoted by the Boric government was praised by the Organization for Economic Cooperation and Development (OECD), which in its latest report on the country stated that “Chile needs reforms to increase productivity, social protection and income taxes, and face short-term challenges such as high inflation”.
It is an “ambitious” but “feasible” plan, added the organization, and indicated that tax revenues of only 21% of GDP “are insufficient to satisfy the growing social demands, while preserving the necessary public investment in infrastructure, education and health”.
The tax reform “goes in the right direction and would bring tax collection closer to the average for Latin America and the OECD, which amounts to 28% and 34% (of GDP), respectively,” the agency added.
Source: Ambito
