Chile’s President Kast proposes corporate tax cuts and SME incentives to boost growth, but faces a divided Congress.
SANTIAGO: Chile’s new president, Jose Antonio Kast, unveiled on Wednesday details of a long-awaited reform package that includes cuts to the corporate tax rate, as his government seeks to revive growth and promote job stability.
Some 40 measures were outlined in the package, with Kast saying that it had five main aims: to make Chile more tax competitive, strengthen formal employment, streamline regulations, provide more legal and regulatory certainty and exercise restraint in public spending.
“This bill is not an ideological agenda. It is a concrete response to … real emergencies,” Kast said in his first address to the nation since taking office last month, urging members of Congress to pass the measures quickly.
The right-wing leader has painted Chile, the world’s largest copper producer, as a country riddled with organized crime and weak finances.
His government has said it wants to lift Chile’s economic annual growth to around 4% from last year’s 2.5%, though analysts have expressed skepticism about whether the goal is realistic.
Kast also lacks a congressional majority, which could hamper his ability to deliver his agenda. Allied right-wing blocs hold just 76 of 155 lower-house seats and 25 of 50 Senate seats.
The centerpiece of the bill is proposed gradual cuts in the corporate tax rate to 23% from 27%, which his government has previously said would be over four years. Some opposition members have, however, argued that the real impact of a corporate tax cut remains unclear.
Other tax measures include the creation of a tax credit for wage payments, designed to encourage many smaller companies to pay employees on the books instead of under the table.
“This injects $1.4 billion annually into the productive sector, benefits 235,000 SMEs (representing 86% of the credit’s recipients), and protects more than 4 million workers. Formal employment will no longer be a penalty but an advantage,” he said.
Other reforms include steps to speed up the issuing of environmental permits for projects such as mines, a temporary VAT exemption on sales of new homes, 400 billion pesos ($450 million) in funds for fire-hit regions and an exemption for homeowners over 65 from property taxes on their primary residence.
($1 = 884.0000 Chilean pesos)
