June 1, 2018 / 7:40 PM / 2 years ago

UPDATE 1-Chile's Pinera vows to use corporate taxes to support social reforms

(Adds details on social reforms, quotes from Pinera speech, price tag for investment plan, context)

By Dave Sherwood and Antonio De la Jara

SANTIAGO, June 1 (Reuters) - Chilean President Sebastian Pinera said on Friday he would keep the country’s corporate tax rate at current levels to help finance urgent reforms to Chile’s ailing education, health and pension systems as his government tries to tame its burgeoning fiscal deficit.

In a wide-ranging, two-hour address to a deeply fractured Congress in the port city of Valparaiso, the conservative billionaire and second-term president detailed a $26 billion spending plan and called for unity as Chile continues its “vigorous march towards development.”

Pinera, whose first term as president was marred by protests over rising inequality, made several nods to progressive causes during the speech, touting his proposal to enshrine women’s rights in the constitution and boost public spending on a privatized pension system blamed by many for insufficient payouts.

“Given the fiscal difficulties we inherited and the breadth and urgency of the social reforms and public works projects still to be done, I’ve decided to hold the corporate tax” at current rates, he said.

During his campaign in 2017, Pinera pledged to partially roll back corporate taxes hiked by center-left predecessor Michelle Bachelet, a move which ratings agency Fitch hailed as key to improving the business climate.

Pinera said his tax overhaul would instead seek to simplify the system put in place by Bachelet, to provide investors and companies with “more legal certainty” in one of Latin America’s most stable economies.

Pinera, who took office in March, said he would nonetheless boost spending on public works projects to $20 billion - including doubling concessions to $8 billion - during his term to spur spending and improve infrastructure.

Pinera also said he would make good on a campaign pledge to eliminate a dictatorship-era law that requires state-run miner Codelco to partially finance the military, replacing it with “multi-year” plan to fund the country’s armed forces.

Pinera’s proposed social reforms include a new, “more just” credit system for university students to be administrated by the state.

He also called for eliminating discrimination by private health insurers based on pre-existing conditions, part of a bigger plan to reduce rising health care costs in the South American country. (Reporting by Dave Sherwood and Antonio de la Jara Editing by Leslie Adler)

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