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Original article: La calculadora no calza: economistas de peso desarman las cuentas de la megarreforma de Kast

The Government’s calculation doesn’t add up. On the opening day of the marathon Finance Committee hearings in the Senate, three renowned economists dismantled the numerical foundations of the massive tax reform proposed by José Antonio Kast . While all supported the need to stimulate investment, they agreed that the projected benefits in terms of growth and revenue are uncertain and warned about the potential fiscal shortfall it could cause.

The so-called «national reconstruction project» currently before Congress includes controversial measures such as reducing the first-category tax from 27% to 23%, eliminating the capital gains tax, implementing a tax credit for formal employment, and establishing a 25-year tax stability for investments exceeding US$50 million, among others.

Economist Andrea Repetto, head of the School of Government at the Catholic University, warned that this initiative, presented against a complex backdrop for public finances, has a definite cost that will reduce tax revenue without guarantees of compensation through increased growth, especially in a «context of fiscal strategy and consolidation needs.»

«Overestimating growth and revenue is much riskier than underestimating it,» she stated, emphasizing the asymmetry of the project pushed by the far-right politician.

«There is an asymmetry here. It is not the same to underestimate revenues versus overestimate them,» she underscored in statements reported by Diario U de Chile.

Her harshest critique pointed to the tax credit for formal employment, one of the most burdensome measures with a high fiscal cost: «We are spending a significant amount of resources to achieve something that may not be attained.»

Projected Revenue Drop of Over $16 Billion Between 2026 and 2031

Former Finance Minister Mario Marcel took the discussion to the numbers and refuted several of the assumptions presented in the financial report, warning that the fiscal impact could be much greater than estimated by La Moneda.

The economist, academic, and former president of the Central Bank (2016-2022) concluded that «the permanent measures imply a direct revenue reduction of just over $16 billion between 2026 and 2031«—a figure that significantly exceeds the official estimate.

Marcel noted that the discussion is taking place amid considerable uncertainties regarding the country’s fiscal situation, making it even riskier to bet on a project with uncertain benefits that would have a high fiscal cost, considering the current government’s stated goals.

Massive Reform Fails to Clearly Contribute to the Fiscal Consolidation Chile Needs

Former Central Bank President José De Gregorio joined in the criticism. While he supported a gradual reduction in corporate taxes, he stated it should occur within a sustainable framework for the country’s finances and fiscal sector.

He fundamentally questioned the government’s argument that blames the 2014 tax reform for the stagnation of the last decade. He once again scrutinized the credit for formal employment, arguing that it entails high costs with uncertain outcomes.

«It’s costly. Approximately 600,000 pesos would be spent monthly for each job created,» an estimate that he claimed could be inflated. His final verdict was blunt: the project, on its own, «does not clearly contribute to the fiscal consolidation» that the Chilean economy needs, as noted by the mentioned media outlet.

Warnings are not new for the Autonomous Fiscal Council, which opened the session reiterating its concerns: deficits could extend for several years, even considering the potential positive effects of growth. The hearings will continue this Tuesday in Valparaíso with more speakers, but the message from the first round is already clear: the calculator of the large-scale reform does not add up, and leading economists have their red pencils ready.

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