Minister of Finance: “Pension reform, such as health reform, are fundamental for the construction of a Welfare State”

In the midst of a scalding of inflation, a record rise in the dollar and the forecast of a recession, in La Moneda, it has been an intense week of work to define the definitive content of the tax reform, which seeks to finance the programmatic commitments of the Government and also align – as spokeswoman Camila Vallejo pointed out – with OECD standards.
After presenting the backbone of the government of President Gabriel Boric, with a collection of 4% of GDP in its sights, after ensuring that the project will be implemented gradually, the Minister of Finance, Mario Marcel, responded to the fears of investors and maintained that the changes promoted by the Executive, along with the pension and health reform, “they are fundamental for the construction of a Welfare State.”
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“Both the pension reform and the health reform, which are within the government program, are fundamental for the construction of a modern Welfare State, capable of protecting people from the economic cost of contingencies that occur throughout life,” said the head of the fiscal wallet, in an interview with La Tercera.
Minister Marcel commented that there was a time in Chile when the Welfare State was seen as “a bad word”, but acknowledged that over time “we have been realizing all the political and social actors that a Welfare State plays a role not only in the economy but also in society; it helps that we all feel part of something common.”
For Mario Marcel, it is important to face the situation and reduce uncertainty today in Chile, especially for investors. “It is evident that in the last two or three years uncertainty has increased a lot due to global, local and political factors,” he added, stating that “postponing the decision to advance in tax reform would be unnecessarily prolonging uncertainty about the future of taxes.”
In any case, he said, “the gap between what is the discussion of this reform and the moment in which it begins to be collected is wide enough to overcome the current economic cycle, the problems linked to inflation or the lower growth in the short term.”
Asked about the criticism of the “poor” stimulus to investment in the reform, the head of the Treasury contextualized that the outlook for investment is quite negative and the projections are of fall for this year and, probably, he added, for next year also if things continue as they are.
“The reform we are proposing, by taxing retired profits with a flat rate tax of 22%, clears that risk. There may have been investors who were putting off their investment decisions pending this definition. We also have a reduction of the first category rate from 27% to 25% and, in addition, this incentive is being created for investment in productivity of companies. All these are quite positive signs for the investment,” Marcel explained.

In that sense, the Secretary of State said that the tax reform “is not a capstone for investment.” On the contrary, he argued, “it should give investors a lot of peace of mind that they will be able to continue to obtain reasonable returns on good investment projects.”
The head of Teatinos 120 emphasized that “the middle class will not only not pay for this reform, but will benefit from it.” He argued that there are quite direct benefits, such as the possibility of deducting from the tax base the expenditure on rent and expenses on care for children, the elderly and the disabled. “On the side of the destination of resources, there are benefits for the middle class as well, such as pension reform or the reduction of waiting lists in hospitals,” Marcel added. And he emphasized: “There is no doubt that (the tax reform) will reduce inequality, given that the tax increase is concentrated in the sectors with the greatest resources.”

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Original source in Spanish