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Sebastian Piñera's Proposal – Relief To The Corporate Tax Burden?

Author:Mr Miguel Guerrero Fuentealba
Profession:Harris Gomez Group

Sebastian Piñera is leading the most recent polls to become Chile's next president. This could mean changes to the reforms that the current administration has been pushing forward the last 4 years. It could calm some of the pessimism that has surrounded the economy, especially when it comes to new investment projects.

Last month, Piñera published his economic plan for the country, which highlighted his basic proposals concerning the overall tax burden on companies as well as his plans for the countries debt. There are still no specific measures, however, the basic proposals and general ideas are already on the table for discussion.

Below we refer to the most recent points promoted by his campaign:

Create a new, simple, and unique tax system, pro-growth, pro-investment and pro-employment.

The tax reform introduced by the current administration in 2014 created two different tax systems that were complex to implement. In fact, during 2015, there was a new law introduced to simplify the reform, and in a way, relieve the new tax burden created by the changes.

On the other hand, corporate tax rates have risen during the last years from 20% to 25% and now to 27% for 2018 (depending on the tax system the taxpayer has chosen or has been granted by default).

In this regard, Piñera's campaign has proposed the following:

Gradually refund the taxes paid at the company level with the taxes paid by the shareholders or partners of the same. This measure seems to indicate that Chile will go back to the original tax system that was in place before Bachelet's tax reform, where shareholders could use 100% of the taxes paid at the company level as a credit when paying their own personal taxes. In other words, it intends to go back to a fully integrated tax system. Reduce and simplify the administrative burden of the tax reform and grant greater legal securities to companies and individuals. All though yet not all that clear, everything indicates that Chile will go back to a single general tax system, unlike today, were we have two different general tax systems. Establish incentives that shall reactivate investment, favouring small and middle size companies, and should reactivate innovation and entrepreneurship as a priority. Gradually converge the corporate tax rate to the OECD average (currently averages around 24%). Guarantee a fiscally responsible policy, maintaining the current level of tax collection. In this regard, it has been also said that the total collection...

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