Written by Camila Weinstein, Tax Lawyer
On Wednesday, March 8th, the Chamber of Deputies unexpectedly rejected the Tax Reform Bill proposed by the government of President Gabriel Boric.
With 71 votes against, 73 in favor and 3 abstentions, the text did not reach the simple majority required to comply with the first constitutional procedure, given that the votes against and abstentions outnumbered the support. In this way, the necessary quorum was not achieved to approve the legislation, which required a simple majority (50+1).
The effect of this rejection is that the text ends its processing, and a similar bill cannot be presented again within a period of one year by the chamber of origin, which in this case was the Chamber of Deputies, unless the government insists on its passage through the Senate, in which case it would need the approval of 2/3 of the senators.
The rejected tax reform bill aimed to increase tax revenue by approximately 3.6% of Chile´s Gross Domestic Product (GDP) through various modifications to income to the Chilean tax system. Specifically, proposed to amend certain matters related to income tax, including an increase in personal tax rates, the creation of a new wealth tax, the incorporation of a tax on retained earnings, among others.
It should be noted that, despite the rejection of this reform, the Senate Mining and Energy Committee approved and sent the Mining Royalty bill, an initiative that modifies the taxation of companies in the sector and seeks to allocate part of its revenue to research and development and to local and regional governments. However, the text is still under discussion.