Kast’s Tax Gift to Businesses: An Opposition Blind to the Logic of Financial Capital

Original article: El regalo tributario de Kast a los empresarios (y esa Oposición que no quiere ver la lógica del capital financiero)

By Leopoldo Lavín Mujica

The neoliberal package introduced by President Kast, known as the Mega-Reform, reduces the corporate tax rate from 27% to 23%. The maximum estimated fiscal cost is $3.215 billion, which the state will forego in tax revenue from large corporations, representing 0.71% of GDP.

This is a typical measure from neoliberal governments aimed at benefitting the owning oligarchies under the guise of encouraging investment and growth. While they may claim it’s not a gift, it constitutes funds that the state will no longer collect.

The Ministry of Finance acknowledges that 79.1% of this benefit is concentrated in the wealthiest 1%, with 49.1% in the top 0.01%.

In the midst of an economic crisis, exacerbated youth unemployment, and a notable rise in the cost of living and fuels, the state is relinquishing resources that should be allocated to education, health, and pensions.

While this unfolds, notable political figures like Francisco Vidal continue to echo government rhetoric without adequately analyzing the dynamics of capital or the context of financial capitalism.

In a September 28 article in El Mercurio, Vidal suggests that the $3 billion returned to large companies could gradually translate into investment, jobs, and growth. By revealing his pro-capital stance, the former spokesperson for Bachelet fails to question the true destination of these funds or the pro-business, oligarchic nature of Kast’s government. His statement exemplifies the opposition elite’s inability to draw consequences and engage meaningfully.

The official promise is well known: lower taxes lead to more investment. However, there is a vast chasm between paying lower taxes and truly investing productively in Chile. No aspect of this tax cut compels that the savings are redirected into factories, equipment, or wages.

Capital can choose to distribute dividends, repurchase shares, pay down debt, or invest in foreign assets. The chain of “tax cut → investment → job creation” is merely a hypothesis, not a natural law.

Chile has already demonstrated that private capital can freely internationalize. According to the SII, Chilean investments abroad rose from 75 trillion pesos in 2019 to 127.6 trillion pesos in 2023, amounting to 45.3% of GDP. Political scientist Rachel Théodore confirmed that this trend persisted even under Kast’s government. Chilean capital prefers to diversify outside the territory where it generates its profits.

The Federal Reserve set its rate at 3.75%-4% in September 2026. Wall Street offers liquidity, depth, and dollar-denominated assets.

The U.S. Treasury recorded net foreign purchases of long-term securities totaling $262.8 billion in May and $207.1 billion in June. This differential attracts capital that might otherwise remain in Chile, but the tax reduction fails to compete with this allure; it intensifies it.

The Central Bank has documented significant outflows of liquid external assets by resident investors. This trend has intensified during episodes of political uncertainty and has not reversed with the change in government.

Some of this capital is chasing returns in speculative markets like the AI bubble. The $3.215 billion that Kast is gifting will likely follow the same path: generating global financial profits, not Chilean jobs.

The fiscal context exacerbates this irresponsibility. In 2025, the country ended with a structural deficit of 3.7% of GDP, more than double the original target. The Budget Office imposed spending cuts to reduce the effective deficit to 1.8% of GDP by August 2026.

While social spending is slashed, the government is also foregoing $3.215 billion in potential revenue. This results in reduced health, education, and public investment, all to finance private profitability.

The logic of financial capitalism explains why the promised miracle will not materialize. Profitability is increasingly measured by the immediate returns on capital, rather than the ability to produce goods or create jobs. Building a factory in Chile takes years, entails risk, and is heavily regulated; buying U.S. Treasury bonds is instantaneous. What seems rational for individual entrepreneurs is destructive to the country’s development.

The reform itself includes a provision to declare offshore capital at a 10% tax rate, reduced to 7% if invested in Chile.

The government expected to collect over $330 million from this measure. They know that Chilean capital is abroad and that the tax cut does not ensure its return. Nevertheless, they are giving away $3.215 billion that the state needs for social programs in the midst of this crisis. This exemplifies the irrationality inherent in capitalism through a fiscal policy.

The question for citizens is straightforward: Will Kast’s $3 billion create jobs in Chile or will it serve Wall Street instead?

Politically, Kast’s neoliberal and far-right government is expropriating from the people of Chile the capital that should finance health, education, and social protection.

The opposition, characterized by a social-democratic, neoliberal concertation ideology that echoes the official narrative, is unprepared for the gravity of the situation: it does not recognize financial capitalism or the oligarchic nature of the government. Without acknowledging this critique, the entire parliamentary elite will continue to legitimize the gift.

Leopoldo Lavín Mujica