In-Depth Analysis of Kast’s Neoliberal Package: Implications and Reforms

Its official title—»National Reconstruction and Economic and Social Development»—plays on the humanitarian urgency generated by the wildfires in the Valparaíso (2024) and Ñuble and Biobío regions (2026) as a framework for legitimacy. However, the substantive body of its 203 pages contains an extensive neoliberal structural reform agenda that far exceeds attention to the emergency.

The project is organized around four pillars: physical reconstruction, economic reconstruction, institutional reconstruction, and fiscal reconstruction.

The diagnosis presented in the text clearly reflects its ideological slant: Chile is said to have «lost the path of progress» since 2014 due to «excessive spending,» «overregulation,» and an increase in corporate tax, directly blaming the reforms from the previous progressive period and proposing to reverse them.

Below are the neoliberal proposals detailed thematically, alongside their social implications.

A. Regressive Tax Reform: Concentrated Benefits for Capital

1. Gradual Reduction of the First Category Tax (art. 10 and art. sixth transitory): The proposal decreases the corporate tax from 27% to 23% over four years (25.5% in 2027; 24% in 2028; 23% from 2029), including SMEs. The comparative argument with the OECD average (24%) is misleading as that average includes countries with robust social welfare systems financed by labor, consumption, and asset taxes, which Chile does not possess to the same degree.

Implications: The reduction implies lower fiscal revenue amidst a context of increasing public debt. According to the document, gross debt rose from 5% of GDP in 2008 to 42% in 2025. Reducing corporate taxation decreases resources available for education, health, and housing, benefiting mainly capital owners, whose concentration in Chile is among the highest in the OECD.

2. Total Re-integration of the Tax System (art. 11): The proposal eliminates the restoration of the 35% credit for the first category tax that final taxpayers (owners or partners of companies) had to pay, reinstating the «total integration» that existed before the 2014 reform. This means that corporate taxes paid can be fully deducted from the global complementary tax of company owners.

Implications: This measure exclusively benefits the owners of high-income companies (those who pay the global complementary tax). It reduces the effective tax burden on those who derive income from capital relative to those earning labor income. It explicitly reverses the 2014 tax reform.

3. Elimination of the 10% Capital Gains Tax (art. 10): The unique 10% tax on profits from the sale of publicly traded shares established by Law 21.420 is abolished. Such profits revert to being «non-taxable income,» meaning they are tax-free.

Implications: Capital gains from stock exchanges are primarily appropriated by the highest income quintiles. Its exemption reinforces the principle that capital is taxed less than labor, deepening inequality. The argument that the tax «harmed market liquidity» is debated: stock markets in countries with capital gains taxes function effectively.

4. Tax Stability Regime for 25 Years (art. 33): A mechanism similar to the now-defunct DL 600 from Pinochet’s era is reinstated: local or foreign investors making investments over 50 million dollars can enter into contracts with the State guaranteeing the stability of the current tax regime for 25 years, including corporate tax, VAT, tariffs, the global complementary tax, and—specifically for mining—the royalty. For foreign investors, an effective total tax burden of 35% is guaranteed.

Implications: This is one of the project’s most significant elements from a democratic sovereignty perspective. By freezing the tax regime applicable to large investments for 25 years, it limits the ability of future parliaments and governments to modify taxation in response to social needs, emergencies, or changes in wealth distribution. Historically, DL 600 was mainly utilized by foreign mining companies to protect extraordinary profits. Moreover, the proposal does not require labor, environmental, or technological transfer compensations.

5. Temporary VAT Exemption on New Housing Purchases (art. fourth transitory): For 12 months from the law’s publication, the first sale of new homes is exempt from VAT. This measure favors those purchasing homes in a market where average prices have risen by 110% in real terms since 2008.

Implications: Although presented as a measure for the housing crisis, it mainly benefits buyers with the capacity for mortgage debt. The housing deficit of 834,000 households and 120,000 individuals living in camps consists of families unable to acquire homes in the market, irrespective of whether they have VAT. A robust social housing policy would require direct public investment and targeted subsidies, not tax exemptions.

6. New DFL 2 Regime for Owners of Three or More Homes (art. 3): Owners of three or more «economic homes» (up to 90 m²) can be taxed on their rental income at a flat rate of 5%, without deductions. This applies to both individuals and legal entities.

Implications: This measure encourages the accumulation of rental properties by those with investment capacity, in a context where the rental market is already under pressure and rents have significantly increased. It may deepen the trend toward the financialization of housing (housing as an asset), where properties function more as investment assets than as residential properties.

B. Deregulation of the Environmental Assessment System: Erosion of Citizen Protection

7. Removal of the Administrative Invalidity of Favorable Environmental Qualification Resolutions (art. 13): The measure removes the possibility of contesting a favorable Environmental Qualification Resolution (RCA) through the invalidation mechanism of Article 53 of Law 19.880. Appeals can only be made through specific environmental regulatory frameworks and only by those who participated in the assessment process.

Implications: This restricts access to environmental justice for communities affected by projects that did not formally participate in the Environmental Impact Assessment (SEIA), a common occurrence for rural, indigenous, or low-income communities. Once granted, the RCA becomes practically impregnable, concentrating decision-making power within the initial assessment process, where information and resource asymmetries between project holders and communities are enormous.

8. Limitation of Precautionary Measures to a Maximum of 6 Months (art. 19): Environmental courts can only issue precautionary suspension measures for a maximum of 6 months (including extensions), after which they automatically expire.

Implications: Environmental precautionary measures protect ecosystems and communities from irreversible damage while judicial conflicts are resolved. Complex environmental legal processes can take years. Limiting precautionary measures to 6 months allows projects under judicial scrutiny to progress, causing damages that may later be impossible to reverse (deforestation, soil removal, watershed intervention). The precautionary principle, a cornerstone of modern environmental law, is severely weakened.

9. State Compensation for Projects with Annullled RCA (arts. 14-18): If a court annuls a positive RCA, the State must compensate the project holder for direct expenses incurred in executing the project. The amount is determined by a commission of experts.

Implications: This rule has a deterrent effect on the State’s ability to defend environmental legality in trials: if the community or appealing agency prevails and the court annuls the RCA, the public treasury (fisco) bears the cost. Moreover, it implies that the business risk of investing in legally questionable projects is socialized onto citizens. The logic is inverted: the party affected by environmental damage has no guaranteed compensation, but the investor does.

10. Deregulation of Salmon Farming (arts. 6 and 7): The requirement of the Environmental Impact Assessment System (SEIA) for relocations of aquaculture concessions is eliminated, expiration for non-use is replaced with an increased licensing fees, and environmental monitoring indicators are relaxed.

Implications: The salmon farming industry has caused significant environmental impacts in southern Chile (ISA, Caligus, algal blooms). The obligation to conduct environmental assessment for relocations was a minimal protection for coastal communities and ecosystems. Its elimination responds solely to the demands of the salmon industry and undermines the rights of artisanal fishing communities and coastal indigenous peoples.

11. Reduction of the Invalidity Period for Sectorial Permits to 6 Months (art. 5): Sectorial authorizations can only be administratively nullified within 6 months (previously 2 years).

Implications: This limits the time available to detect permits’ irregularities and correct them, favoring the consolidation of defective or illegal authorizations.

12. Pause on the Expansion of Free University Education (arts. 24 and 25): The entry of new institutions into the gratuity system is frozen for 2 years. Furthermore, the reference index for activating new coverage tiers is modified: the Tendential GDP is replaced by the Non-Mining Tendential GDP, and the tax burden requirement is raised to 29.5% to advance toward universal gratuity. Subsequent progression stages are eliminated.

Implications: The change of index is particularly regressive: by excluding mining (a sector generating enormous rents for the country), the Non-Mining Tendential GDP grows more slowly, making it virtually impossible to reach the conditions for expanding gratuity. In practice, this indefinitely freezes the policy, contravening the commitment to advance towards universal higher education. It primarily affects young people from middle and lower strata aspiring to access debt-free education.

13. Elimination of the SENCE Tax Credit (art. 26): The tax credit allowing companies to deduct training expenses from their taxes, costing 300 billion CLP annually, is repealed. Only basic leveling programs (literacy, arithmetic) remain funded.

Implications: Although the project argues that the credit lacks proven impact on worker productivity—supported by academic studies—its removal without an alternative public training policy leaves workers without a training mechanism. The problem with the credit was its poor design and use by companies, not training itself.

14. Massive Incentives for Public Servant Retirement (art. 28): The number of voluntary retirement bonuses for staff increases from 2,200 to 6,000 per year.

Implications: The thinning of the State through mass early retirements can affect public services in areas such as health, education, oversight, and justice, where accumulated experience is crucial. This measure forms part of a view of the State as a «cost» to be reduced, rather than as a public capacity to be strengthened.

D. Tax Amnesties and Privileges for Capital

15. Amnesty for Foreign Assets and Income (art. third transitory): A voluntary 12-month regime to regularize undeclared foreign assets is created, with a substitute tax rate of 10% (7% if repatriated and invested in Chile for 5 years). Payment extinguishes civil, criminal, and tax responsibilities derived from omission.

Implications: Tax amnesties for undeclared capital abroad consolidate tax impunity and send a clear message: those who evade taxes can regularize by paying very little. The 10% tax rate is significantly lower than what would apply if the assets had been declared timely. Academic research on tax amnesties shows they do not deter future evasion but can incentivize a cycle of evasion-amnesty. Moreover, these amnesties are regressive by definition: only those who possess undeclared capital can benefit.

16. Substitute 10% Tax for FUT/STUT (arts. 11, eleventh and twelfth transitory): Companies with retained earnings in the Reinvested Earnings Fund (FUT) or Total Taxable Earnings Balance (STUT) can opt to pay a substitute 10% instead of the final taxes they would owe upon distributing those earnings.

Implications: The FUT balances historically correspond to business profits that never paid the final taxes (global complementary or additional tax) that should have been paid when distributed. One of the major criticisms of the Chilean tax system before 2014 was precisely this mechanism, which allowed capital owners to accumulate wealth tax-free. Regularizing them at 10% when the maximum global complementary tax rate is 40% amounts to a massive tax subsidy for large capital owners.

17. Intellectual Property Exception for Mining (Data Extraction) and AI (art. 8): Article 71T is incorporated into Law 17.336, allowing the reproduction, adaptation, or distribution of legitimately published works without authorization or payment to the owner when the purpose is the extraction and statistical analysis of large volumes of data (text, sound, image), provided it is not «cover exploitation».

Implications: This rule has profound consequences for creators, journalists, writers, musicians, designers, and researchers. It enables tech companies, particularly those developing AI models, to use Chilean creative works to train commercial systems without any compensation. The distinction between «statistical analysis» and «cover exploitation» is difficult to delineate in practice, and international jurisprudence on this matter is still budding. It is a policy that shifts value from creators to tech companies.

E. Other Regressive Measures

18. Tax Credit for Low Wages as a Substitute for Labor Policy (art. 9): Instead of containing labor costs by regulating working hours or minimum wage in another manner, the proposal grants a tax credit of up to 15% of the salary to companies that hire low-wage workers (up to 7.8 UTM = approx. CLP 478,000 in April 2026). The credit is deducted from the first category tax.

Implications: The «employment credit» model has precedents in the U.S. EITC, but as a subsidy to the company (not the worker), it results in a state subsidy to the labor cost of those who employ at low wages. It does not guarantee salary improvements and may inhibit collective pressure for wage increases.

19. Cross-Referencing Social Data for Tax Oversight (arts. 22 and 23): The SII is authorized to cross-reference information with the Social Homes Registry (Ministry of Social Development) to audit beneficiaries of social programs, and that information must also be shared with DIPRES for efficiency studies.

Implications: Although the text includes confidentiality safeguards, the connection between the social protection system and tax administration exerts a disciplining effect on the most vulnerable sectors: those receiving subsidies are subjected to cross-fiscal scrutiny, while capital abroad is regularized through amnesty. This creates an asymmetry of control: increased state scrutiny over the poor and less over the wealthy.

Comprehensive Critical Assessment

Emergency Legitimization for Structural Reform. The most significant rhetorical strategy of the project is to present a neoliberal structural reform agenda under the guise of «reconstruction» following the fires. The reconstruction of homes for those affected in Ñuble and Biobío occupies the first pages and articles 1 and 2, but the bulk of the articles governing tax, environmental, educational, and labor matters of lasting impact are unrelated to the fire’s emergency.

Reversal of the Reform Cycle 2014-2023. The diagnosis of the project explicitly blames the 2014 tax reform, reduction of working hours, and minimum wage increases for the deterioration of the Chilean economy. All substantive measures aim to reverse those reforms: lower corporate tax, total reintegration, elimination of capital gains tax, tax invariability, and containment of social spending. This constitutes a comprehensive neoliberal counter-reform.

Regressive Distribution of Benefits and Burdens. The primary beneficiaries of the project are capital owners (companies, shareholders, holders of foreign assets, mining investors), real estate developers (VAT exemption), the aquaculture industry, and large technology firms (intellectual property exception for AI).

The main losses are borne by workers (restrained training expenses, weakening of labor regulations), higher education students (free education freeze), communities affected by industrial projects (weakening of SEIA and precautionary measures), and creators (intellectual property exception).

The Real Fiscal Problem and the Proposed Solution. The project acknowledges Chile’s chronic structural deficit and rising public debt. However, the solution it proposes—lowering taxes on capital, freezing social spending, and attracting investment—reproduces the same logic that, according to heterodox economics, generates the problem: with lower revenue, additional borrowing or cuts in social services are required. The reduction of effective tax burdens for high-income taxpayers is hardly compatible with the fiscal balance that the project claims to pursue.

Weakening of Environmental Protection in a Context of Climate Crisis. Chile is one of the countries most vulnerable to climate change (droughts, fires, extreme events). The irony of the project is that the very fires it uses as justification are partly a product of that vulnerability, and yet the proposed measures systematically weaken the environmental assessment and control mechanisms that could mitigate future disasters.

Summary

The National Reconstruction and Economic and Social Development Bill of April 2026 is, at its core, a neoliberal structural adjustment program that combines reductions in the tax burden on capital, accelerated environmental deregulation, containment of social spending, and amnesties for large fortunes.

Its presentation as «reconstruction» following the fires is a rhetorical device that channels the legitimacy of the humanitarian emergency toward a long-term reform agenda.

Its implications for Chilean society include greater inequality in income and wealth distribution, diminished state capacity to finance public goods, weakening of communities’ environmental rights, and deepening of the extractive development model.

The central question the project does not answer is how a country with Chile’s income distribution—one of the most unequal in the OECD—can finance its social needs while systematically reducing the tax burden on capital.

Leopoldo Lavín Mujica

La entrada In-Depth Analysis of Kast’s Neoliberal Package: Implications and Reforms se publicó primero en El Ciudadano.

Abril 27, 2026 • 6 días atrás por: ElCiudadano.cl 41 visitas 2039058

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