Major Economic Reform Approved by Senate Amid Social and Environmental Concerns Favoring the Wealthy

Original article: Megarreforma para los de siempre: Senado aprueba proyecto del Gobierno entre alertas sociales, ambientales y beneficios para los más ricos

After a session that concluded at 2:40 AM on Thursday, the Senate passed a major economic tax reform project, amidst social and environmental alerts and concerns regarding benefits primarily for the wealthy.

As anticipated, the government of José Antonio Kast secured 26 votes in favor to advance the initiative, while the opposition could only muster a maximum of 24 votes against it. Following the specific discussions, the project will return to the Chamber of Deputies, where it will undergo its third constitutional review.

The ruling party successfully approved controversial measures labeled the «major reform for the usual beneficiaries», including a reduction in corporate taxes, tax invariability, and exemptions from contributions for individuals over 65 years old.

The tax invariability provision was approved by the chamber. This framework establishes tax timelines of 10 years for investments of $50 million, 15 years for amounts between $50 and $350 million, and 20 years for investments exceeding that threshold. Companies opting for this special regime will be subject to a fixed corporate tax rate of 1.5%.

The vote on this provision resulted in 26 votes in favor, one abstention from Senator Jaime Araya, and 23 votes against, including senators PPD Loreto Carvajal and Ricardo Celis. The latter had initially agreed to support the initiative but withdrew their backing after Finance Minister Jorge Quiroz sought to offset the tax burden with a reduction in the corporate tax rate to 22%.

Regarding tax burden reductions, a tiered decrease in the First Category Tax (IDPC) was approved with 26 votes in favor and 24 against, reducing the rate for large companies from 27% to 23%. The schedule lays out a tax rate of 25.5% in 2027, 24% in 2028, and a permanent 23% from the 2029 fiscal year, marking this measure as the «heart» of the proposed reform.

Additionally, a system was approved for calculating property taxes, which includes exemptions on contributions for first-time homeowners over 65 years old. This initiative received 28 positive votes, gaining support from PPD’s Pedro Araya and independent Karim Bianchi.

In relation to the earlier points, a compensation package for the Municipal Common Fund (FCM) was validated, equating to 1 million 500 thousand UTM, to cover the effects of the property tax exemption.

Concerning the reimbursement of costs to companies whose projects have been revoked through an Environmental Qualification Resolution, several opposition senators cautioned that this initiative is «unique in the world, utterly irregular, and with evident legal flaws». However, these criticisms did not prevent the related articles from being approved with 26 votes in favor and 24 against.

Furthermore, a gradual reintegration of the tax system was supported, with complete implementation scheduled for the tax year 2031. It was also approved to allow first-category contributing companies to deduct up to 0.7% of their annual income tax from employee training expenses (Sence franchise), as reported by the cited media.

In the opposition’s amendment block, a proposal from the Front Amplio was endorsed to eliminate the exclusive childcare requirement for companies with 20 or more female employees, as well as a rule that prohibits charging interest on interest. In both instances, Minister Quiroz reserved constitutional validity, arguing that they did not align with the core ideas of the project.

An indication from socialist senator Daniella Cicardini concerning the right to be forgotten was also approved in the Finance Committee. However, the finance chief formulated another constitutional reservation, asserting that this matter was not covered in the original text.

«Black Day for the Treasury»

At the end of the session, the head of the fiscal wallet stated that «today is an important day for Chile» and reiterated the argument that the controversial major reform aims to attract investments, create jobs, and stimulate the reconstruction of homes destroyed by wildfires in the Biobío and Ñuble regions.

From the opposition, Senator Claudia Pascual (PC) described the project’s approval as «a black day for the treasury» and warned that Kast’s government initiative reduces revenue «without structural compensations».

«We are going to take steps back,» she cautioned.

Opposition to Appeal to the Constitutional Court

Senator Alfonso de Urresti (PS) criticized the major reform, stating that «in depth and rigor, it is not a good norm.»

He announced that the opposition will appeal to the Constitutional Court regarding the environmental, tax, and invariability measures proposed in the project, indicating that «at the latest on Monday,» reported El Mostrador.