January 30, 2020 / 12:30 AM / 22 days ago

Chile passes bill to boost taxes on rich, spur investment, small business

SANTIAGO (Reuters) - Chilean lawmakers passed a bill on Wednesday that raises taxes on the rich while reducing the burden on the elderly and small businesses, a nod to months of protests over inequality in the South American nation.

Police detain a demonstrator during anti-government protests in Concepcion, Chile, January 29, 2020. REUTERS/Jose Luis Saavedra

The legislation is expected to boost Chile´s total tax haul, helping underwrite other costly measures demanded by protesters, including a guaranteed minimum wage, a pension plan overhaul and changes to the country´s public-private health system.

The most violent, widespread riots since Chile´s return to democracy in 1990 have rocked the top copper producer´s economy as demonstrators demand a stronger social safety net.

Growth, investment and consumer demand are all expected to decline as the fiscal deficit yawns.

Chilean Finance Minister Ignacio Briones called the nearly two-year-old bill, rewritten amid the unrest in late 2019, a compromise that would help spur investment while levying taxes in a “progressive manner ... something we all value.”

Chileans who earn over $18,900 a month, or who own second homes and real estate, will see their taxes rise, while the elderly will pay less, according to a summary of the overhaul published by Congress.

The measure also streamlines the corporate tax system, setting the rate for large businesses at 27%, the summary said.

Chile´s once stable economy is expected to struggle at least through 2021 after protests caused billions of dollars in damage to public infrastructure and private business.

The central bank in December slashed its 2020 growth forecast to a range of 0.5% to 1.5% from a previous 2.75% to 3.75%

The tax bill also includes several measures to help spur investment.

The measure is expected to take effect in March, following review by the country´s Constitutional Court.

Reporting by Dave Sherwood; Editing by Peter Cooney

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