After the tax reform proposed by Gabriel Boric’s Administration was rejected in the Lower House, the government had one last opportunity to process the amendments to the tax legislation through the Senate, coming into effect in July.
The question remains: Will the Executive secure enough votes to proceed with increased tax collection? Experts weigh in on the situation.
The tax reform, put forward by the Government, faced rejection by the Chamber of Deputies and Chamber of Deputies on March 8, gaining 73 votes in favor, 71 against, and three abstentions.
Despite the majority of votes being in favor, they failed to surpass the combination of negative votes and abstentions, as mandated by the rules of procedure.
The proposed reforms by the Executive included alterations to the Tax Code and Income Tax, and the introduction of a new wealth tax, among other regulations.
Boric’s government aimed to escalate tax collection by 3.6 percentage points of the GDP over four years, thereby financing social projects.
Despite the initial failure in Congress, President Gabriel Boric has announced that they will persist with the tax reform in the Senate, where a two-thirds quorum is required for approval.
Analysts speculate that key initiatives like tax reform might face opposition and fail to be passed due to an unspoken pact to withhold approval.
However, should this occur, the government stands to gain morally, essentially adopting a lose-to-win strategy.
Boric’s government program had also promised student loan debt forgiveness. As of December 2022, approximately 818,000 debtors await the fulfillment of this promise.
However, the realization of this pledge is now linked to the approval of the tax reform.
Experts warn that tying campaign promises to approve already rejected reforms poses risks, especially for those who put their faith in the President and his initial promises.
The government is accused of falling short of its commitments and failing to provide a convincing narrative, resulting in an increased reliance on parliamentary decisions over decisive executive actions.
The opposition has already expressed their disapproval of the tax reform, considering it bears too much resemblance to the one rejected in March.
However, some view the tax reform as a necessary state policy beneficial to the country, not just the current government.
The need for the government to secure greater resources to steer the country towards fairness and meet the needs of all Chileans is emphasized.
Chile news, English news Chile, tax reform Chile, economic news Chile, Boric’s Government plays its last card to move forward with the tax reform in Chile