After months of negotiations, meetings with trade associations, businessmen, the political world and various economic actors, the Government finally communicated its new tax reform proposal, under the name of “Fiscal Pact”. Therefore, two separate projects will be sent to Congress, seeking to raise additional resources to finance social programs and other commitments of the Executive.
The first project would include measures to increase tax control and compliance, with an estimated collection of 1.5% of GDP; and the second would contemplate changes to the income tax, raising the contribution of companies and people with higher incomes. In addition, the President indicated a reduction in exemptions and the incorporation of OECD standards on minimum taxation at a global level for multinational companies.
The “Fiscal Pact” would have the following axes:
1. Modern and efficient tax system: to avoid evasion and avoidance, 12 principles will be defined.
2. Public spending priorities: social policies will be defined for USD 8 billion.
3. Strengthening and efficiency of tax control and compliance: the Internal Revenue Service (SII, for its initials in Spanish), National Customs Service (SNA, for its initials in Spanish), Customs Tax Courts (TTA, for its initials in Spanish) and General Treasury of the Republic (TGR, for its initials in Spanish) would be reformed.
4. Growth through investment, formalization of the economy and productivity: 38 measures would be presented along these lines, including tax incentives equivalent to 0.5% of GDP; the processing time for investment projects would be reduced by a third; an “entrepreneurship route” would be designed for SMEs; all together with a proposal with 17 measures to reduce informality.
5. State spending: control and transparency measures will be introduced, together with a new state agency for the evaluation of public policies. So far, 20 initiatives have been identified that would strengthen efficiency, quality, and transparency, which are divided into four areas: spending quality and efficiency, service quality and innovation, transparency and integrity, and fiscal discipline and responsibility.
6. Follow-up Commission: to monitor and evaluate that the implemented measures give the expected results.
President Gabriel Boric announced that they would be in the process of refining the proposals to start, in the short term, the legislative discussion of these projects. In this link, the official Government document.
