The Chilean Congress has approved a series of tax reforms that include relief for low-income earners and very modest increases on the richest sectors of the population.
The reform includes:
- An additional US$2.2 billion per year raised in tax revenue.
- Tax exemptions for income earners of up to $811 per month, and reductions for earners of up to $1478 per month.
- Creation of a new top tax bracket of 40 percent (up form 35 percent) for income earners of over US$18,740 per month.
- Establishment of a 25 percent corporate tax rate for businesses with annual sales of up to $2.7 million and 27 percent over this threshold.
- Establishment of a property tax of 0.075% for properties between US$500,000 and $875,000; 0.15% for properties between $875,000 and $1.1 million; and of 0.275% for properties over $1.1 million.
- Creation of a Value-Added Tax for foreign-based digital platforms, including Netflix, Airbnb, Spotify and UberEats (not Uber).
- Creation of a type of taxpayer ombudsman to represent low-income earners at the Internal Revenue Service.
The bill was passed unanimously by the Senate on Wednesday and will come into effect either this month or in March.
After months of popular mobilisations across the country in response to extreme inequality and rising costs of living, the bill is one of the first major legislative attempts by the government of President Sebastián Piñera to try to quell protester demands.
President Piñera, himself a billionaire and fervent supporter of Chile’s ultra-neoliberal economic system, has faced extreme criticism for his handling of the protests, which have resulted in over 30 deaths, 1000 of injuries, reports of torture and sexual abuse at the hands of security authorities and more than 28,000 detentions.
In this context, the tax reform can be seen as an attempt to make minor changes that pose no genuine threat to the system that was at the heart of protester demands, but can be portrayed as listening to the people.
In April, Chileans will vote on whether they want to convene a constituent assembly to re-write the country’s constituent approved during the military dictatorship of the 1980s.