(Adds stock market hitting one-year intraday high, government
By Antonio De la Jara and Anthony Esposito
SANTIAGO, July 9 After weeks of political
wrangling, Chile's finance minister unveiled changes to a tax
reform bill late on Tuesday, including a larger increase in the
corporate tax rate in exchange for concessions sought by
The reform, a centerpiece of President Michelle Bachelet's
administration, maintained an overall goal of increasing tax
revenue by $8.2 billion, equivalent to 3 percent of gross
Corporate taxes will now gradually increase to 27 percent by
2017 from a current 20 percent, according to the agreement
between the minister and the Senate's five-member Finance
Committee. In the bill as initially presented to Congress,
corporate taxes were to increase to 25 percent.
The Santiago Stock Exchange's blue-chip IPSA index
rose to an over one-year intraday high midday Wednesday as
market participants reacted positively to the compromise.
What is fueling local share prices is "mostly the changes to
the tax reform because the uncertainty surrounding the bill is
starting to dissipate and there is the possibility that we're on
track for a long-term (economic recovery)," said Arturo Curtze,
trader at Vantrust Capital in Santiago.
The IPSA was up 1.36 percent to 3,974.09 points at 1400
local time (1800 GMT), its highest intraday level since
"We've reached a historic agreement ... we've managed to
move forward on the most complex and profound tax reform of the
last 30 years," Finance Minister Alberto Arenas said late
Tuesday from Congress in the port city of Valparaiso.
With the tax reform "growth will go hand in hand with
inclusive development, and companies and individuals will be
taxed in a more balanced way," said Arenas.
The funds raised through the uptick in the tax take will go
toward financing an education overhaul and improvements to
Chile's health system.
Bachelet has vowed to address Chile's rampant income
inequality, the worst among the Organization for Economic
Co-operation and Development's 34 member states.
Last week, Arenas said that the government's target of
reducing the fiscal structural deficit to zero by 2018 was
conditional on the approval and implementation of the tax reform
Plans to scrap the so-called "FUT," a mechanism by which
companies can gain tax exemptions on part of their profits,
remained intact after the agreement.
"The heart of the reform remains intact, the FUT will be
eliminated and those who make more will pay more," government
spokesman Alvaro Elizalde said on Wednesday.
Businesses and opposition lawmakers have said the move to
eliminate the FUT could stem investment in an economy that is
already stalling, and especially hurt companies that have scant
access to international credit markets.
The new changes to the tax bill also include incentives for
investment and saving.
"The system will allow medium and large companies to
reinvest part of their profits," said Senator Ricardo Lagos
Weber, who heads the Senate Finance Committee.
The government expects the tax reform to receive final
approval from Congress within the next couple of months.
(Reporting by Antonio de la Jara and Anthony Esposito;
Additional reporting by Felipe Iturrieta; Writing by Anthony
Esposito; Editing by Christopher Cushing, John Stonestreet and