Gabriel Borek aims to start his government with tax reform as the first challenge

The new president-elect of ChileAnd Gabriel Borek, intends to start his government from taking office on March 11 to quickly send it to Congress The main project will be to finance symbolic social and economic reforms Contained in the I Approve Dignity Alliance program that he conveyed to Palacio de la Moneda at the polls last week.

According to the Chilean press, citing sources close to the leftist leader, Borek will be placed on the road opened by the former president Michelle Bachelet, who also kicked off his term by launching the last major tax reform implemented in the country in April 2014.

Although the details of the government’s tax reform program across the New Andes are not yet known, Borek will try to get approval for the project, which Collect 5% of GDP Under his mandate (which can cover 8% of GDP in 8 years), by eliminating exemptions, reducing evasion, green and wealth taxes, and large-scale mining revenues, among others.

The move must be conditioned by the balance of power in Congress. Borek State It is building very broad agreements With different political forces and civil society because we understand that the reforms must be stable and lasting,” said economist Nicholas Bohm, coordinator of a team of 30 experts working on the preparation of the reform, said the newspaper yesterday. third.

Gabriel Borek intends to start his government by quickly sending the law to Congress. Photo by AFP

complication

Those media added that the president’s close circle has the option to send the bulk of the reform in March and Seperate in another project later Green taxes, given their technical complexity and political impact.

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The intent is that the end of the exemptions, the anti-fraud and tax evasion measures, as well as the inheritance tax, will begin to be collected in 2023. A year later, the mining royalties will take effect.

“It’s a fix will allow funding many aspects of the government program in a financially responsible manner and puts us in alignment with countries Organization for Economic Cooperation and Development In terms of collection as a percentage of GDP and progressiveness,” Bohm stated.

On the other hand, according to the newspaper MercuryA member of the President-elect’s Economic Advisory Council, Eduardo Engel, said some “important projects” will not be completed because the macroeconomic and financial situation will be “difficult”.

The specialist said, “It is clear that the macroeconomic and financial situation will be difficult during the next government, and giving priority means postponing the programs that one initially planned to implement,” without specifying which areas will be excluded.

Gabriel Borek hug with a follower.  AP . photos

Gabriel Borek hug with a follower. AP . photos

negotiate

Given that the ambitious reform has been blamed and rejected by sections of the ruling party and business, Borek’s inner circle is already designing Political and legislative strategy to pave the way.

Along the same lines, University of California economist Sebastian Edwards estimated that would be a mistake” Trying to pass a major tax reform, because you risk being trapped and not approved by Congress.

The program includes tax increases of 5% of GDP, which is a huge number. To put it in its proper proportions, it comes down to increasing what has already been collected by 25%. In addition, it is four times more than what was obtained with the Bachelet reform.”

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The reform will face previous financial problems. According to the Central Bank of Chile, the economic growth, That this year close to 12% of GDP, Thanks to the strong push with state funds to revitalize consumption, it will suddenly stop. For the next year, an expansion of between 1.5% and 2.5% is expected.

Financial accounts are in red. “This will be a critical issue,” he explained. Clarion Thomas Rao, Director of the Institute of Economics at the Catholic University of Chile. “This year, the actual fiscal deficit will reach 8.3% and the public debt will approach 39% of the output,” he added.

But he would also face rejection in Congress, although Borek toned down the radical nature of some of his proposals to win the ballot. In both the Senate and the House of Representatives, the left and right blocs were linked, Which would mean curbing the most radical reforms.

Without his majority, the president must muster the support of other political forces. Thus, dialogue and flexibility are essential.

Source: AFP, AP, Clarín

PB

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