Chilean Senate Approves Economic and Tax Reforms

The Chilean Senate has approved economic and tax reform measures presented by President José Antonio Kast’s administration. The government aims to revive the country’s economy and attract new investments through this initiative. The approval followed a narrow vote and an extensive 12-hour debate that concluded in the early hours of the morning. Differences among senators added to the duration of the discussion.

After the vote, Finance Minister Jorge Quiroz stated, “Today is an important day for Chile. The country needs to grow, and this project makes it possible.” While the ruling party views the reforms as a necessary step to bring in more investments, create jobs, and boost an economy still impacted by the COVID-19 pandemic, the opposition argues that the reforms favor only the wealthy. They criticize the loosening of tax and environmental regulations, which they believe could hinder the country’s development.

This debate comes amid an economic stagnation in Chile, with the Gross Domestic Product dropping by 0.5% in the first quarter and several months of negative economic activity. The unemployment rate has reached 9.4% from March to May, marking the highest level since June 2021. President Kast, a conservative lawyer who took office in March, vowed to implement an emergency government and restore the damaged Chilean economy. His leadership represents Chile’s most significant shift to the right since the military dictatorship era (1973-1990), proposing neoliberal economic policies with decreased state intervention and more private sector autonomy.

Political analyst Gilberto Aranda commented, “What existed before was corrected neoliberalism with subsidies and other elements. Now, the presidential efforts focus on deepening and returning to the orthodox neoliberal model of the late 1970s and early 1980s.”

One of the most contentious debates was over tax exemptions and indemnities for companies whose projects get rejected due to environmental issues. With 26 votes in favor and 24 against, senators eventually approved a gradual reduction in corporate taxes from the current 27% to 23% by 2029. Additionally, they passed a measure to reimburse expenses to companies whose projects were revoked for environmental reasons, drawing criticism and constitutional challenges from several opposition senators.

Senator Yasna Provoste, from the Christian Democratic Party, remarked, “What the right has done is grant a tax amnesty.” Other approved measures include a new tax regime for investments and an exemption from property taxes for senior citizens who own their first home.

Despite the Senate’s approval, the proposal must return to the Chamber of Deputies, which had initially endorsed it in late May. New amendments have been added, such as the financial ‘right to be forgotten’ rule that mandates the deletion of prescribed or expunged debts from financial records after five years. The lower house will deliberate over all Senate modifications in what is expected to be a challenging stage of the process following Thursday’s narrow vote. If any changes are rejected, the process might extend for months, necessitating a bicameral commission to address differences.