(Bloomberg) — Chile President Gabriel Boric outlined a new push to raise taxes, ditching a prior plan to reform the system, as his administration seeks funding for its social agenda.
(Bloomberg) — Chile President Gabriel Boric outlined a new push to raise taxes, ditching a prior plan to reform the system, as his administration seeks funding for its social agenda.
The proposals, described as a “fiscal pact,” include income tax changes, greater fiscal oversight and transparency, as well as measures to support productivity and economic growth, Boric said in a televised speech. The president said he wants legislative talks to start as soon as possible.
“Everyone knows that, on this path, we need more growth and permanent resources, and that we require a fiscal pact where those who have more contribute more,” Boric said on Tuesday. The president stressed the government was willing to negotiate the “important political and economic agreement.”
Boric is mounting another push for a tax overhaul after his prior attempt was unexpectedly rejected by lawmakers in March. Since then, the government has regrouped and held talks with political parties, small businesses and large enterprises in efforts to reach consensus. Still, the administration has so far failed to overcome skepticism from the opposition in a deeply divided legislature.
Read more: Chile’s Finance Chief Says New Tax Reform Proposal Is ‘On Track’
A tax reform is the centerpiece of Boric’s plans to battle inequality in the country. Top spending priorities include raising pensions, providing better care services for children and the elderly, strengthening public security and reducing waiting lists at public hospitals, the president said.
The new fiscal pact will include spending for about 2.7% of gross domestic product, according to a separate statement from the Finance Ministry. Increasing pensions will require 1.2% of GDP, health measures another 0.9%, while improving security and other social protection measures should each cost 0.3%.
In his State of the Nation address June 1, Boric laid out his vision for how tax reform legislation would generate new revenues and benefit groups ranging from teachers to victims of sexual violence. At that time, he said he planned to send the Senate the proposal that the lower house had shot down.
Still, Boric is negotiating from a point of weakness, as a poll published in July showed he is backed by only 27% of the population. Given the initial tax reform was snubbed by the lower house, the administration would have needed support from two-thirds of senators had it insisted with the same legislation.
Many businesses leaders and lawmakers oppose tax changes amid economic weakness. Gross domestic product is expected to grow just 0.2% this year, according to government estimates published last month, while unemployment has ticked up and confidence remains muted.
The government plans to send the first bills from the pact in the fourth quarter of this year, while the income tax reform bill should be filed to Congress between March and May of next year, according to the Finance Ministry’s statement.
(Updates with fiscal spending plans in sixth paragraphs, timing in 10th.)
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