Through a column of opinion, Senator Francisco Huenchumilla (DC) reacted to the proposal of officialism, to seek financing to reform pensions through the increase of a point to value added tax (VAT), and harshly criticized the idea for considering VAT to be a regressive tax (i.e., which affects the poorest to a greater extent) , considering instead that raising income taxes paid by the wealthiest would be «of all obvious justice.»
«Since we all agree that VAT is a regressive tax, (in government) they have sought communication ruse to make it more acceptable, talking about a «consumption tax.» In Chile, this tax is called VAT. Raising VAT by one percentage point would bring the tax rate to 20%, above the OECD average rate,» the parliamentarian began to analyze.
«Of course, there is one alternative that is not regressive: Raise taxes on income paid by the wealthiest. This has two advantages. The first is that they pay more for those who have the most, as is of all obvious justice,» he said.
«The second is that we would approach, albeit slowly, the share of income taxes in the OECD: 60% of total revenue versus only 40% in Chile. Why should the OECD be outperformed in VAT and not matched in income taxes of the richest? Surely to make an annoying response to our compatriots on the most affluent right,» the MP fustigated.
Universal basic pensions
In the same text, Senator DC noted that «the right seems to accept that having basic universal pensions has to be part of the solution. Even Horizontal, Evópoli’s study centre, has suggested that you could start with a universal basic pension (PBU) of two hundred thousand pesos per month. That would take lower-income retirees above the poverty line and can be a starting point,» the mp said.
«They also seem to accept that this has to be taxed. Discrepancies start at this point. What taxes have to be resolved,» the legislator said.
At this point, the senator indicated that «The right’s argument goes beyond how the PBU is funded. What they are looking for, strategically, is to defend the AFP business (…) if the issue of lower-income retirees is resolved by the way they themselves pay for their retirements with their food and medicine purchases, then an additional 6% of the additional contribution could go entirely to AFPs, increasing the size of the business,» he said.
«For the opposition to reach an agreement, they will offer to create a state AFP that could over time have a small part of the business. Because the business is huge and funded by the salaries of all workers, they don’t mind losing a smaller share of a large, appetizing billion-dollar cake,» he said.
Opposition and Constituent
Finally, the MP stated that «I do not lose hope that the opposition will be united to prevent this new abuse, and that we give ourselves the time to establish a true social security system (…) inevitably the issue of pensions will be in the debate on the future Political Constitution, because of the shortsightedness of the right, and economic groups that do not understand that this is one of the pillars of the model that divides us as a country, and which requires a consensus from all sectors,» he concluded.