There were significant deviations, which would indicate lower revenues than those projected by the outgoing administration. Failed projections would impact the pension reform.
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One of the debates that marked the discussion of the Tax Compliance Law (LCT), promoted by the outgoing government in 2024, was the uncertainty surrounding the projected revenue, particularly the expected collection of 1.5% of GDP in steady state.
This debate resurfaced at the beginning of 2025, during the final stage of the pension reform process in the Senate. There, it was decided that the main source of financing for the increase in the amount and coverage of the Universal Guaranteed Pension (PGU) would be the controversial anti-evasion proposal.
Both during the discussion of the 2026 Budget Law and in recent weeks, the Ministry of Finance has defended that the regulation, which granted more intrusive tools to the Internal Revenue Service (SII), has performed as projected in its financial report.
However, with the lower fiscal revenue of US$7.020 billion compared to what was originally estimated for 2025—which ultimately influenced the high structural deficit of 3.6% of GDP—concerns have been raised about the weak performance of the tax regulation.
In its latest report on fiscal deviations, the Autonomous Fiscal Council (CFA) explained that the non-mining tax revenues projected for 2025 included an estimate of revenue from the Tax Compliance Law of 0.37% of GDP (0.27% of GDP from income tax, 0.08% of GDP from VAT, and 0.02% of GDP from other taxes).
Evidence and expert warnings
The Autonomous Fiscal Council recalled that evidence collected by the International Monetary Fund (IMF) shows that reforms of this nature aimed at reducing evasion depend on behavioral change.
The figures from the first years of implementation show that the IMF was right. As the Association of Accountants, we previously highlighted the weakness of basing these estimates on an unreliable evasion report.
Economist Cecilia Cifuentes, a professor at the ESE Business School of Universidad de los Andes, also pointed out earlier concerns. The figures show that the revenue generated by the LCT is lower than what the government projected.
From the beginning, there was broad consensus that 1.5% of GDP was an overly optimistic revenue target, with a more likely outcome being about one-third of that projection.
The Managing Partner of CCL Auditores Consultores, Javier Jaque, points to issues in the scenarios used to calculate the law’s revenue. “At the time, it was stated that the revenue estimates were based on scenarios assuming a significant disincentive for avoidance and evasion, as well as increased formalization. Economically, the signals have not moved in that direction—for example, in terms of formalization or factors indicating greater fiscal pressure to reduce evasion and avoidance. The aim is to achieve lower evasion while doing the same as before. These are likely the elements behind the gap between projected and actual revenue,” he explained.
The US$3 billion cut instructed by Jorge Quiroz
As reported by El Mercurio in February, the incoming Minister of Finance, Jorge Quiroz, instructed the secretaries of state who will accompany President-elect José Antonio Kast to implement the first fiscal adjustment of the new administration.
Through a directive, a US$3 billion spending cut is planned for the first year of the new administration.
This amount adds to the US$800 million reduction decreed by the outgoing administration for 2026, after reporting a third consecutive deviation from the fiscal deficit target.
The total spending adjustment that the incoming government aims to implement is US$6 billion.
Prudential measures?
The LCT established that, after three years from its entry into force, the Ministry of Finance must commission an external evaluation to assess the implementation and application of the measures contained in the law.
This evaluation must address, at a minimum, its effect on fiscal revenue, its impact on economic activity, its distributive effects, and compliance with spending commitments made during its approval process.
Additionally, the pension reform stipulated that if the LCT sustainability report reveals lower-than-expected revenue, not compensated by other sources, the transition period for increasing employer-funded contributions could be extended from 9 to 11 years.