Chilean lawmakers shelve government tax reform in defeat to Boric

SANTIAGO, March 8 (Reuters) - The government of Chilean leftist President Gabriel Boric suffered a major setback on Wednesday after lawmakers refused to move forward with a proposed tax reform meant to finance key elements of the president's progressive agenda.

The tax reform aimed to ultimately collect up to 3.6% of gross domestic product and proposed a mining royalty, which is also being discussed separately.

With 73 votes in favor and 71 against, lawmakers dismissed the bill presented last July. It needed 79 votes to move forward.

The government can still try to move the initiative through the Senate, where it does not have a majority.

Finance Minister Mario Marcel expressed regret over the bill's rejection, and said he and Boric would discuss ways to move the government's agenda forward.

"We are not now in a position to define exactly what steps will be taken," he told a news conference. He called the rejection "an issue of the greatest political, economic and social gravity."

The expected added revenues were destined to fund future reforms in the pension and health systems, some of the key promises made by the government.

The proposed reform included adjustments for income tax, a wealth tax, the reduction of exemptions, measures against evasion, and greater spending on tax incentives.

Reporting by Fabian Andres Cambero; Writing by Valentine Hilaire; Editing by Brendan O'Boyle and Leslie Adler

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