The Chilean Senate has approved an economic and tax reform project proposed by President José Antonio Kast’s administration. The goal is to boost the country’s economy and attract new investments.
The project was passed with a narrow margin, as the upper house debated each article within the initiative for 12 hours, concluding almost at 3 a.m. due to disagreements among senators.
“Today is an important day for Chile,” said Finance Minister Jorge Quiroz after the vote. “Chile needs growth, and this project makes it possible.”
While the government views the project as a means to attract investments, create jobs, and revive the economy impacted by the COVID-19 pandemic, the opposition believes it only benefits the wealthy. Concerns have been raised about the relaxation of tax and environmental regulations that could hinder the country’s development.
The project comes at a time when Chile is experiencing economic stagnation. The nation’s Gross Domestic Product fell by 0.5% in the first quarter, with several consecutive months of negative economic figures. Additionally, the unemployment rate reached 9.4% from March to May, the highest since June 2021.
President Kast, a conservative lawyer, took office in March, promising to implement an emergency government to fix Chile’s struggling economy. His administration marked a significant shift to the right since the military dictatorship (1973-1990) and supports a neoliberal economic policy, which advocates for reducing state size and increasing private enterprise autonomy.
Political analyst Gilberto Aranda remarked, “What existed before was neoliberalism corrected with subsidies and other elements. Now, the focus is on deepening and returning to the orthodox neoliberal model of the late 70s and early 80s.”
One of the heated debates during the overnight session concerned tax exemptions and compensations for companies whose projects are denied due to environmental issues. With 26 votes in favor and 24 against, a gradual tax reduction for large companies was approved, lowering the rate from 27% to 23% by 2029.
The same vote count approved the article allowing financial restitution to businesses whose projects were revoked for environmental reasons. This decision led to criticisms from opposition senators, who described the measure as irregular and plan to take the matter to the Constitutional Tribunal.
Senator Yasna Provoste of the Christian Democratic Party commented, “What the right has done is deliver a tax amnesty.”
Other approved measures include a new tax regime for investments and a property tax exemption for senior citizens owning their first home.
Despite Senate approval, the project must return to the Chamber of Deputies, which initially backed it in late May. Several new amendments have been added, such as the “right to financial oblivion” provision, mandating the erasure of financial records for debts that have been prescribed or extinguished after five years.
The lower house must now consider all modifications made by the Senate. This stage of the legislative process is expected to be challenging after the close Senate vote. If any changes are rejected, the process might extend for several more months, necessitating a bicameral commission to resolve disagreements.