SANTIAGO (Reuters) - The ambitious program of tax reforms pledged by Chile’s government-in-waiting could affect investment and would ideally be watered down to adapt to a slowing economy, outgoing Finance Minister Felipe Larrain said.
Left-leaning Michelle Bachelet will return to the presidency on March 11, after easily beating the conservative government’s candidate in last year’s election. She has promised tax hikes to pay for education and health reform.
However, she is embarking on her term in office at a time when the economy of the top copper exporter is weakening, with some economists fearing that Chile’s current account deficit and other factors make it vulnerable to market volatility.
Larrain said Bachelet’s planned tax reforms, which include increasing corporate taxes to 25 percent from the current 20 percent and eliminating some loopholes, would inevitably affect investment.
“The economy is decelerating, and I imagine the incoming government will take into account the economic situation and will try, I hope, to achieve a pretty wide consensus on tax reform,” Larrain said on Tuesday at a meeting with journalists.
“If you put forward that kind of plan and tell me that won’t affect investment, I don’t know where that would be true.”
The reforms as they currently stand “appear very strong to me” he said, adding that perhaps the final reforms would be more moderate than those proposed.
As a key plank in Bachelet’s reform package, and one which should easily pass Congress, the tax reform will likely be one of the first out of the blocks after she takes power.
The bill could enter Congress as early as the second half of this month, local media have reported.
Reporting by Antonio de la Jara; Writing by Rosalba O'Brien; Editing by Jonathan Oatis