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Progressive Think Tank Network Critiques Kast’s Tax Reform Plans: «Significant Risks to Growth, Employment, Fiscal Sustainability, and Tax Equity»
The Progressive Think Tank Network (RCPP), comprising 13 study centers and foundations linked to Chilean progressivism, has delivered a comprehensive critique of the ambitious tax and fiscal project proposed by the Government, titled «For National Reconstruction and Economic and Social Development.»
The statement, endorsed by Instituto Igualdad, Chile 21, Nodo XXI, ICAL, Centro Democracia y Comunidad, Horizonte Ciudadano, Rumbo Colectivo, Fábrica Chile, OPES, Fundación por la Democracia, Fundación Socialdemócrata, Fundación Moebius, and La Casa Común, argues that the initiative poses significant risks to growth, employment, fiscal sustainability, and tax equity in Chile.
The RCPP contends that the project combines four distinct agendas—reconstruction, employment, investment, and structural tax reform—into a single complex legislative initiative, making serious technical debate difficult and threatening an expedited process without broad political consensus.
Therefore, it proposes separating the project into three components: urgent physical reconstruction; measures to promote investment and employment; and a structural tax reform subjected to more extensive technical and political deliberation.
The document warns that the core tax proposals are based on «excessively optimistic» assumptions regarding future growth and investment, which have been challenged by both the International Monetary Fund (IMF) and the Independent Fiscal Council (CFA).
According to the RCPP, the tax reductions included would lead to persistent fiscal deficits and an increase in public debt, even under favorable conditions.
In this context, they highlighted key contested measures, including:
Permanent Measures
- Gradual reduction of the corporate tax from 27% to 23%;
- Full reintegration of the tax system;
- Tax credit on payroll;
- Exemption on property taxes for primary residences for those over 65;
- Tax invariability for 25 years (across six governments) for investments of $50 million or more.
Temporary Measures
- Tax benefits for repatriated capital;
- Reductions in donation taxes;
- Tax exemptions on new housing and property taxes.
The RCPP asserts that these measures would disproportionately benefit higher income segments and have minimal impact on investment, productivity, and employment.
Furthermore, they note that nearly all tax measures favor the wealthiest 1% of the population and that the reform would be “profoundly regressive.”
They also criticize the project for not incorporating significant measures to combat tax evasion and avoidance, such as strengthening customs, relaxing bank secrecy, financial traceability, or increasing oversight of major taxpayers.
Alternative Proposals: Investment, Productivity, and Employment
The RCPP argues that sustainable economic growth depends not only on tax reductions but also on productivity, innovation, infrastructure, and institutional modernization.
To this end, they propose expediting the implementation of the Framework Law on Sectoral Authorizations, strengthening the institutional framework for permits, streamlining environmental assessments, and strategically coordinating public and private investment.
Other proposals include:
- Promoting a 4.0 industrialization strategy;
- Expanding digital infrastructure and 5G networks;
- Developing industries related to lithium, copper, and green hydrogen;
- Enhancing research, development, and innovation (R&D);
- Boosting exports and supporting SMEs;
- Establishing a capital market to finance concessions and infrastructure.
Regarding labor issues, the document rejects the salary tax subsidy proposed by the Government, arguing that it does not create additional jobs, as it primarily provides tax relief that benefits large companies.
Instead, it proposes establishing a Universal Crèche System, strengthening the Unified Employment Subsidy (SUE), focused on new hires, women, youth, and SMEs.
The RCPP also questions the elimination of the SENCE tax credit, asserting it should be reformed and modernized, particularly in a context marked by automation, artificial intelligence, and digital transition.
Fiscal Warning and Call for Broad Agreement
Finally, the document warns that Kast’s Government proposal would deteriorate Chile’s sovereign credit rating, increasing interest rates and making credit more expensive for families and businesses.
According to the RCPP, all of this creates recessionary trends and does not address the increasing spending pressures on health, pensions, and care, making a massive reduction in tax revenues “utterly unwise” in the current context.
In conclusion, the Network called for the withdrawal of the legislative urgency on the project and for a cross-technical table to be opened to reach long-term agreements on growth, investment, employment, and fiscal responsibility that provide political and social sustainability for the adopted policies.
Check the full RCPP document HERE
El Ciudadano
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