According to the General Treasury of the Republic, when considering the last three years, the increase reaches 54%. The Treasurer, Hernán Nobizelli, explained that among the factors behind the rise is “the latest reassessment of residential properties, which came into effect in 2022.”
Read the full article in Pulso – La Tercera.
The latest draft of the new constitution included eliminating property tax payments for a primary residence. However, a significant group of tax experts and economists described this measure as regressive. This is because the properties that pay this tax are mostly located in higher-income municipalities, which in turn contribute part of these funds to lower-income municipalities. Additionally, it is a highly revenue-generating tax.
The figures from the General Treasury of the Republic support this view. In 2023, total revenue reached $2.2 trillion (millions of millions), representing an increase of 16.6% compared to 2022, when $1.9 trillion was collected. Moreover, when considering the last three years, from the end of 2020 to 2023, the increase reaches 54%.
In 2019, total property tax revenue was $1.4 trillion, a figure that remained stable in 2020. In 2021, it rose to $1.6 trillion, and in 2022 it increased by 19%, reaching $1.9 trillion.
In 2023, of the total revenue, 55.5% came from the 20 highest-income municipalities in Chile, while nearly a third, 28.6%, was contributed solely by the municipalities of Las Condes, Santiago, Lo Barnechea, Vitacura, and Providencia.
On the other hand, Treasury data also shows that Puente Alto, Maipú, La Florida, Valparaíso, and Temuco are the municipalities that received the highest contributions from the Municipal Common Fund (FCM), totaling $220.346 billion.
One of the arguments for maintaining this tax is that more than half of the collected resources are allocated to the Municipal Common Fund. Thus, 40% of total revenue goes to the municipality where the property tax originates, while 60% goes to the FCM, except for the municipalities of Las Condes, Santiago, Providencia, and Vitacura, which contribute 65% to the FCM and retain 35% of their real estate tax revenue.
Last year, the Municipal Common Fund collected $2.3 trillion, and nearly half of those resources came from property tax payments. The remainder comes from vehicle circulation permits ($601.032 billion); business licenses ($242.199 billion); vehicle transfer tax ($61.255 billion); fines, speed cameras, toll systems (TAG) ($26.386 billion); and state-owned assets ($935 million).
What explains this increase?
The Treasurer General of the Republic, Hernán Nobizelli, explained that “one of the factors influencing this increase is the latest reassessment of residential properties, which came into effect in 2022.” In that regard, he specified that “the 19% growth from 2021 to 2022 and the 16% increase in 2023 fall within historical growth ranges.”
While he noted that “the reassessment came into effect in January 2022 and its greatest impact is seen in that year’s revenue, part of this reassessment can still be observed in the first half of 2023 due to delayed installment payments by some taxpayers.” He also highlighted that “in 2023, collection efforts for the Territorial Tax were strengthened nationwide.” Other factors mentioned by the Treasurer that explain this increase include “individual revaluations and inflation.”
The 2022 nationwide reassessment of non-agricultural real estate increased by 23.4%, rising from more than $327 trillion to $404 trillion. In the case of residential properties, the increase was 22.1%, going from more than $191 trillion in December 2021 to $233 trillion for this semester.
The Territorial Tax rates, defined by the Executive in Supreme Decree No. 437, were set at 0.893% for residential real estate on the portion of assessed value up to $169,144,585, and 1.042% on the portion exceeding that amount. For non-residential properties, such as commercial properties, warehouses, parking lots, or undeveloped land, among others, the rate was set at 1.042% on the assessed value.
Javier Jaque, leading partner of CCL Auditores Consultores, stated that “it was expected that revenue would increase due to the fiscal reassessment; therefore, it is a factor to consider and shows that it is a revenue-generating tax, but on the downside, it is a tax on wealth.”