The Chilean Senate approved an economic and tax reform proposal on Thursday, put forward by President José Antonio Kast’s administration. The government hopes this will rejuvenate the country’s economy and attract new investments.
The proposal faced a narrow vote after a protracted debate lasting 12 hours, concluding near 3 a.m. due to disagreements among senators. Following the vote, Finance Minister Jorge Quiroz stated, “Today is an important day for Chile. Chile needs to grow, and this project makes it possible.”
While the ruling party views the proposal as a vehicle to attract investments, generate jobs, and boost an economy still reeling from COVID-19, the opposition argues it benefits only the wealthy. They criticize relaxed tax and environmental regulations, suggesting they could hinder the country’s development.
The debate occurs amidst Chile’s economic stagnation, with a 0.5% GDP decrease in the first quarter and several months of negative economic activity. The unemployment rate was 9.4% between March and May, the highest since June 2021.
Kast, a conservative lawyer aged 60, took office in March, vowing to run an emergency government to repair Chile’s struggling economy. His presidency marks Chile’s sharpest rightward shift since the military dictatorship (1973-1990), advocating for a neoliberal economic policy that aims to reduce state involvement and enhance private sector autonomy.
“What existed before was neoliberalism tempered with subsidies and other elements,” political analyst Gilberto Aranda commented. “Now, the presidential efforts focus on deepening and returning to that orthodox neoliberal model from the late 1970s and early 1980s.”
One of the most contentious debates concerned the exemption of contributions and compensations for companies whose projects face environmental rejections. By a vote of 26 in favor to 24 against, the Senate approved a gradual tax reduction for large businesses, lowering the rate from 27% to 23% by 2029. The same vote count passed a provision for reimbursing expenses to companies with environmentally revoked projects, drawing criticism from opposition senators who plan to challenge this before the Constitutional Court.
“What the right has done is to grant a tax amnesty,” stated Senator Yasna Provoste of the Christian Democratic Party.
Other approved measures include a new tax regime for investments and an exemption from contribution payments for senior citizens who own their first home, among others.
Despite the Senate’s approval, the proposal returns to the Chamber of Deputies, which initially agreed to it in late May, to consider amendments like the ‘right to financial oblivion’. This requires the removal of prescribed or expired debt records after five years. The lower house must review all Senate modifications, posing a challenging procedural stage following Thursday’s close vote. If any changes are rejected, the process could extend for several months, necessitating a bicameral commission to resolve discrepancies.
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