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Chilean President Kast pitches flagship economic bill including corporate tax cut

Chile President José Antonio Kast detailed legislation that’s the bedrock to his economic policies late on Wednesday, ahead of what will likely be lengthy debate and voting in the nation’s divided Congress.

(Bloomberg) -- Lea en español

The proposal, which will be sent to Congress in the coming days, features an investment statute that guarantees tax rates, a gradual cut to levies paid by medium and large companies to 23% from 27%, a subsidy for formal employment and an expanded emergency reconstruction fund following wildfires in parts of the country’s center-south. The bill has more than 40 measures, Kast said.

The goal is to propel the pace of economic growth from 2.5% to about 4% at the end of his term in 2030, Kast said. By that time, he wants a balanced budget and unemployment to fall to 6.5%, down from current levels above 8%.

“We are going to break the bureaucracy that paralyzes and suffocates investment,” Kast said in his first nationally-televised address since taking office on March 11. “Chile has to grow strongly again and create jobs.”

Chile’s government is advancing the flagship legislation as stakes run high for Kast just a month after he took office vowing to spur economic growth, narrow the deficit and fight social woes like crime. The president’s popularity tumbled after he backed the nation’s biggest hike to fuel prices since at least 1980, which was prompted by war in the Middle East. That decline leaves the former lower house deputy more vulnerable as officials press ahead with his agenda.

Although the president’s allies preside over both chambers, the governing coalition lacks clear majorities in both the Senate and Lower House, meaning delicate talks and concessions will likely be needed to pass reforms.

“I ask Congress to legislate on this bill urgently,” Kast said. “The right and the center do not compete in this, the government and the opposition do not compete.”

Speaking to reporters about the bill on Thursday, Finance Minister Jorge Quiroz said a positive impact on growth will come via greater investments, rather than aggregate demand caused by public spending.

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The comments came after a a Criteria poll published on Sunday showed Kast was was backed by 36% of respondents, down from 50% three weeks prior. The same survey, which was carried out April 8-9, found that only 28% said taxes on large corporations should be cut to achieve stronger economic growth.

As Kast’s address was broadcast, residents in some parts of the capital city of Santiago could be heard banging pots and pans in protest.

“I know there will be voices that say that this project favors those who have the most,” Kast said. “Those who today say that first you have to collect taxes and then grow have been demonstrating for twelve years that this sequence does not work.”

Previously, the administration of Kast’s leftist predecessor, Gabriel Boric, suffered a debilitating blow early in its term when legislators rejected a broad tax reform that sought to raise funds for increased social spending.

--With assistance from Antonia Mufarech.

(Updates with finance minister comments in 8th paragraph)