Tax Reform: Committee continues hearings while opposition formulates conditions to pass it
14 marzo 2019

On March 13, the Finance Committee ended a session in which it had continued the debate on the tax modernization bill (Exp. 12.043). The session was attended by Juan Manuel Baraona Sainz, professor of Economic Law at the University of Chile, and Joseph Courand, executive of Deloitte’s Tax Department. They highlighted the improvements that the reform will bring to the Chilean tax system. The vote on the bill was postponed, since only today the opposition has been able to reach consensus on the conditions they will demand from the ruling party for the bill’s approval. These include changes in tax compensations from high-level tax payers. The demands will be submitted to the Ministry of Finance tomorrow. If accepted, the text could be voted on in next week’s session.


Both the mentioned invited speakers at the session gave their backing to the bill. In his presentation, Joseph Courand argued that it responds to an “urgent” need for simplification, with the current semi-integrated scheme being “unsustainable” in generating two separate tax systems that complicate tax compliance. Reintegration, he contended, would be key to simplifying the system and promoting private investment. In his presentation, Juan Manuel Baraona Sainz said the reform would resolve problems with the current tax system, incorporating reductions and deductions in expenses related to the generation of new capital.


Nevertheless, the most important breakthrough in the debate of the bill occurred that same day, outside of the Committee process, with opposition deputies – who make up a 7-strong majority of the Committee’s 13 members – agreeing on the conditions they will demand from the ruling party for approving the bill. Chief among them will be limiting the modifications to the tax compensation mechanisms affecting high-level tax payers that feature in the bill as it is currently written.


These demands or conditions will be set out in a document signed off by the seven opposition deputies, and sent to the Ministry of Finance. The Executive has shown itself open to dialogue, so it is likely these demands will be accepted. In that event, the bill could be voted on in next week’s session.


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