El Ciudadano
Original article: Vodanovic derriba megarreforma de Kast: “El error no solo es político, también es técnico”
Vodanovic Critiques Kast’s Mega Tax Reform: «The Mistake is Both Political and Technical»
Senator and President of the Socialist Party (PS) Paulina Vodanovic has dismantled the controversial mega tax reform proposed by President José Kast, warning that it lacks robust financial foundations and will not ensure significant revenue growth in the short term.
During her appearance on Mesa Central, the PS leader challenged both the technical and political aspects of the far-right leader’s proposal, which includes controversial measures such as lowering the first-category tax from 27% to 23%, establishing a tax invariability statute for long-term investments (25 years), eliminating the capital gains tax, and implementing a tax credit for formal employment, among other things.
She pointed out that although Kast bets on future growth to compensate for the reduction in state revenue, the goals set could take up to 25 years to achieve.
According to Vodanovic, the mega tax reform «aims to collect less as an act of faith, expecting that this lower revenue will somehow balance out over the long term, perhaps in 25 years, the same duration as the tax invariability, where we will tell large companies to invest because we won’t raise taxes during that period.»
«We will guarantee them that for six administrations this will remain unchanged, and with that reduced income, we will provide the same benefits to the people,» she questioned.
For the lawmaker, José Kast’s proposal is inconsistent and lacks reasonable financial arguments.
«That’s inconsistency; it lacks a reasonable financial explanation. Therefore, this is also technical, not just political,» she asserted.
Bloomberg Warns of Fiscal Risks from the Mega Reform
The concerns raised by Senator Paulina Vodanovic align with an analysis conducted by Bloomberg, which warned that the economic-tax reform bill—based on fiscal austerity—could pose fiscal risks, projecting a decline in public revenue over five years and deficits extending to 2050.
«The reform alone does not contribute to fiscal adjustment, at least not during Kast’s administration, and on the contrary, adds a risk factor if growth does not meet expectations,» noted analyst Felipe Hernández from Bloomberg Economics.
The agency warned about the potential effects of the measures pushed by Kast’s administration on public finances, indicating they would result in a reduction of 838 billion pesos in revenue, with that figure increasing to 2.8 trillion by 2050.
According to the analysis, one of the measures with the most significant fiscal impact would be the gradual reduction of corporate taxes from 27% to 23%.
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