Chile’s President Orders Tax Reform Amid Protests

RIO DE JANEIRO, BRAZIL – Since early March, social protests in Chile have regained momentum. Thousands of people are on the streets in Santiago and other towns.

Meanwhile, President Sebastián Piñera has announced a successful agreement with sections of the opposition on a tax reform, which would nevertheless clearly conflict with the demands of the social organizations.

The tax reform, which Piñera decreed in late February, was part of the trade-offs that the government had been negotiating with the opposition in Congress since late last year.

By increasing the maximum tax rate to 40 percent, the reform is intended to place a greater burden on the wealthiest, to finance new investments and the implementation of the social organizations’ demands. In doing so, the President intended to accommodate the demands of social organizations.

The protests broke out in October last year. They were mainly directed against the increased cost of living. Criticism has repeatedly been directed at the private pension, health, and education systems, as well as the toll collection.

In addition to a new constitution, there are calls for reforms to address the tremendous inequality in the Andean country. Piñera had repeatedly announced social reforms and pledged improvements.

But the announced tax reform has been met with widespread criticism. According to critics, it favors companies rather than the general population through potential “premature write-offs” and an explicit investment focus.

In contrast, the tax increase for the wealthiest is merely symbolic, the critics say. In addition, the enforcement of the value-added tax would be intensified, which proportionally always affects the less affluent sections of the population to a greater extent. Sections of the opposition in Congress regard the tax reform as nothing short of fraud.

However, the government stresses the exemplary cooperation of parts of the opposition that has enabled this bill to be passed. While thousands are on the streets demanding his resignation, President Piñera announced: “Today more than ever, Chile must keep this spirit of dialogue, cooperation and agreement alive. The challenges we face are too great for us to be divided over trifles.”

For the full picture, see our Brazil Tax Reform: Complete Guide.