The next challenge of the proposed tax reform

In general, and especially in the business world, there is awareness that the evolution of capitalism and the market in most countries has generated three major problems after the process of globalization: a climate crisis, a great inequality of wealth and income, and a significant capture of institutions by economic power.
In our country, the climate crisis is knocking on our door more and more frequently, while inequality continues to grow, especially when measured by considering the income of capital. President Boric has presented it by saying that 87% of the country’s sales are made by large companies, and it can be added that territorially almost 80% of them belong to companies in the Metropolitan Region, also showing that inequality has an important territorial component.
In this context, the Minister of Finance has made an excellent and pedagogical presentation of the tax reform proposal that tries to collect more than 4% of GDP in regime, aiming that those who pay taxes are those who earn the most or have more wealth in the country, which represents no more than 3% of the population, with the aim of raising progressivity or improving equity through the tax system. Additionally, it promises to reduce the spaces of tax avoidance or evasion, this means that the “ballot or invoice” in supermarkets should end, business leasing to finance family cars, purchases from bankrupt companies to reduce the profits of companies, or sales of cheap shares between companies to reduce the value of the company at the end of the year, which are later reversed back to the real price.
Additionally, it justifies the increase in taxes to finance social rights and increase productivity, especially of SMEs, and adds that both the proposed mining royalty and the corrective taxes aimed at protecting the environment would increase the budgets of the regions. Unfortunately, given the current legislation these declarations are not binding, that is, the collection is generally centralized and the allocation is made via annual budget, so regional governments will have to find a way to demand the fulfillment of this promise and avoid what happened with the special tax on mining that most of it ended up being spent in the Metropolitan Region.
But before thinking about how to secure spending in the regions, the proposed reform will have to deal with the third problem mentioned at the beginning. The institutional crisis, which has manifested itself in our country through the capture of a part of Congress by the economic power, as demonstrated in the illegal financing of politics through ideologically false ballots and the fishing law, among other institutional disasters.
Then, once the design and presentation of the tax reform proposal has been developed, the next challenge will be to get congressional approval as it has been designed. The undesirable alternative is that we repeat the situation of the previous reform that ended up being changed so much in Congress that not only did it not collect what was expected, but it left enough spaces for circumvention and evasion to remain significant in the country. So the question of whether the congressmen will rise to the occasion? it is valid, since it can happen as in the past, that they are captured by the part of that 3% that thinks that the country is still sustainable with the levels it presents in the three problems mentioned: climate change, inequality and institutional crisis; and therefore a greater tax effort is not required as proposed in the tax reform, which attacks the three central problems, promising with respect to the last, maximum transparency in the destination of the proceeds so that the population can make the evaluation of what has been done.

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Original source in Spanish

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