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March 14, 2023
2023-0480

Chilean Chamber of Deputies rejects tax reform bill

  • The Chilean Chamber of Deputies have voted against the tax reform bill under consideration since July 2022.
  • It appears the Government will wait for the one-year term set forth by the Constitution before moving submitting a new bill on tax reform.
  • Congress is continuing to discuss two initiatives, one related to the mining industry and one related to green and regional taxes.

On 8 March 2023, the Government of President Gabriel Boric suffered a major setback as the Chamber of Deputies rejected the tax reform bill that has been under discussion in Congress since July 2022 (for background, see EY Global Tax Alerts, Chile's Congress to discuss tax reform proposal and Chile's Executive Power modifies tax reform bill).

In a tight vote, the bill was rejected with 73 votes in favor, 71 against, and 3 abstentions (under the Chamber's regulation, abstentions count as against votes since the quorum needed for passing a bill is 50% plus 1), with the abstentions being unexpected under the Government's calculations.

The rejection of the bill means that the Government has the alternative to move forward in the Senate, for which it would need two-thirds of a quorum to get approval, or else let one year pass before filing a new bill. The Finance Minister Mario Marcel indicated that the Government would opt for the latter.

As the funding of the most important initiatives to be put forward by the Government depended on the 3.6% Gross Domestic Product additional revenue that the tax reform aspired to, it is to be expected that the bill (or a different one) will effectively be refiled in Parliament, once the one-year term, set forth by the Chilean Constitution, has passed.

However, there are two initiatives, within the same general tax reform initiated by the Government of President Boric, that will continue to be subject to discussion at Congress during the year aside of the rejection of this tax reform bill. One of these initiatives is related to the new mining royalty for the mining industry (currently under discussion in the Senate after the approval received in the Chamber of Deputies in 2021) and the corrective, green and regional taxes (separate bill of law that should be submitted for discussion at Congress within the next couple of months).

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For additional information with respect to this Alert, please contact the following:

EY Chile, Santiago

Ernst & Young LLP (United States), Latin American Business Center, New York

Ernst & Young LLP (United Kingdom), Latin American Business Center, London

Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific
 

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