By Javier Jaque, Lead Partner at CCL Auditores Consultores.
The tax debate has once again taken center stage in the public discussion following the presentation of the new “national reconstruction” bill by President Kast’s administration, with a clear objective: to reactivate investment. In this context, the proposed measures collectively aim to provide a meaningful stimulus to boost economic activity, although not without tensions regarding fiscal revenue.
Among the measures, the reduction of the corporate income tax rate from 27% to 23% stands out prominently. This is undoubtedly one of the strongest signals to the business community. Corporate tax burden directly influences investment decisions, and its reduction not only improves competitiveness but also frees up resources that can be reinvested in new projects.
Likewise, the effective repatriation of capital will represent a direct injection of resources into the country. When well designed, these types of instruments make it possible to mobilize funds currently held abroad, generating positive short-term effects.
On the other hand, the reduction of VAT on housing, indirectly but quite clearly, boosts investment by helping absorb the existing stock of homes currently for sale. This, in turn, encourages the development of new investment projects that had been stalled due to unsold inventory, thereby fostering renewed activity in the real estate sector.
However, any policy involving tax cuts brings an evident challenge: fiscal balance. In the short term, tax reductions imply lower government revenues. Nevertheless, the proposal includes compensatory mechanisms aimed at mitigating this effect, such as a temporary reduction in the donations tax and the option to declare capital held abroad at a preferential rate. These measures are intended to increase short-term revenue and partially offset the initial decline.
That said, not all measures generate the same level of political and social consensus. Perhaps one of the most contentious elements is the reduction in the donations tax, as it may be perceived as favoring those with greater wealth and therefore as unfair to those not subject to it. However, beyond this perception, it also responds to an economic rationale. Moreover, this type of tax can be compared to the substitute tax implemented during the administration of former President Michelle Bachelet and other governments at the time.
From this perspective, the proposed bill contains complementary measures. The strategy is clear: to ensure that the increased economic dynamism generated by these policies ultimately broadens the tax base in the medium term. In this way, the reform proposal moves in the right direction, potentially offsetting the initial decline in revenue through the injection of resources associated with donations and capital repatriation.