Chile presidential favorite Bachelet eyes major tax reform

SANTIAGO Tue Apr 9, 2013 5:23pm EDT

Former Chilean president and former executive director of gender equality body U.N. Women Michelle Bachelet is welcomed by her supporters upon her arrival at Santiago airport March 27, 2013. REUTERS/Ivan Alvarado

Former Chilean president and former executive director of gender equality body U.N. Women Michelle Bachelet is welcomed by her supporters upon her arrival at Santiago airport March 27, 2013.

Credit: Reuters/Ivan Alvarado

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SANTIAGO (Reuters) - Former Chilean President Michelle Bachelet said on Tuesday she would pursue major tax reform to overhaul the nation's education system and reduce economic inequality if she is elected in November, as polls predict.

Bachelet, a popular center-leftist who headed the world's top copper-exporting nation from 2006 to 2010, has asked a group of experts to come up with a package of tax measures by the end of May.

She said the tax reform will look for higher-earners to pay more in a country that is experiencing robust economic growth but where inequality remains stubbornly high.

Demands for free and improved education have triggered massive protest marches, helping send the approval ratings of conservative president Sebastian Pinera tumbling.

"Those with more resources should contribute correspondingly to the progress and human development in Chile," Bachelet said at a press conference as she introduced the group that will put together the proposal.

"Taxes need to redistribute (wealth). We need to guarantee the financial sustainability of an education reform, as well as other socio-political reforms to combat inequality," said the pediatrician-turned-politician.

The previous tax reform, championed by Pinera's government and approved by Congress last September, also was aimed at providing funds for an overhaul of the nation's schools.

Pinera's tax overhaul increased state revenue by some $1 billion per year, about 0.4 percent of gross domestic product, by increasing the corporate tax rate to 20 percent from 17 percent and closing loopholes.

Hefty tax cuts planned for the wealthiest Chileans were dropped from the bill after months of jostling in Congress.

Bachelet, who leads in polls to win the presidential election, said the planned changes in education aren't a "tiny reform," and that new tax revenue is crucial.

"I'm convinced that if we don't take on education seriously, with a structural reform and not some tiny reform ... we're not going to have any possibility to keep developing and growing as a country," she said.

Copper miners in Chile are nervous the package could include a royalty hike.

Bachelet's return to politics in March after months of speculation is a relief to her fractured left-wing coalition, which lost to Pinera in early 2010 after 20 years in power. She is expected to face little competition in the primaries.

Pinera is barred from seeking a second consecutive term under the constitution.

Front-runners for the ruling coalition's candidacy are businessman and former Public Works Minister Laurence Golborne and former Defense Minister Andres Allamand.

(Reporting by Antonio de la Jara; writing by Anthony Esposito; editing by Xavier Briand)

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