Chile’s Congress has given final approval to a groundbreaking law aimed at combating tax evasion and boosting government revenue. The legislation marks a significant victory for President Gabriel Boric just days before he must present the 2025 budget.
The Chamber of Deputies endorsed changes introduced by the Senate to the Tax Compliance Law on Wednesday. This new law strengthens penalties for tax crimes and enhances corporate oversight to fight economic informality.
Under the new legislation, cash payments will face limitations, among other measures. Once implemented, the law is expected to increase fiscal revenue by 1.5% of gross domestic product, equivalent to about $4.5 billion.
Finance Minister Mario Marcel emphasized the government’s commitment to rigorously enforcing the new powers granted by the law. He stressed that tax evasion and avoidance hinder inclusive growth and foster fraud in society.
The Boric administration is finalizing the 2025 budget proposal, due for presentation this month. The new compliance law will provide an extra $1.2 billion in fiscal revenue next year, according to Marcel.
These additional funds will finance social spending, including plans to increase pensions and bolster public security. However, some economists remain skeptical about the projected revenue estimates from the legislation.
Andrés Pérez, chief economist for Latin America at Itaú Bank, expressed doubts about the ambitious goal of collecting 1.5% of GDP. He suggested that strengthening investment and potential GDP growth might lead to a more sustainable recovery.
Chile’s Congress Approves Landmark Tax Evasion Law
In a recent interview, Marcel revealed that this law and income from a lithium production agreement will provide more budget flexibility. The government maintains its goal of halving the fiscal deficit, demonstrating its commitment to financial responsibility.
The approval of this law represents a significant step in Chile’s efforts to create a more equitable and transparent tax system. It reflects the government’s determination to address economic challenges and promote social welfare.
As Chile moves forward with these reforms, the impact on the country’s fiscal health and economic landscape will be closely watched. The success of this initiative could set a precedent for other nations grappling with similar challenges.
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