Chilean Government Takes Tax Reforms Slowly

by Jason Gorringe, Tax-News.com, London

04 October 2001

As he attempts to enact labour and tax reform in the face of fierce opposition from the right-wing and the private sector, Chilean President, Ricardo Lagos, is taking it slowly.

In a recent interview, he described the opposition party as 'tied to General Pinochet and obsessed against us', but repeatedly stressed the need for Chile to be seen as a 'serious country'. Alongside labour reforms which will reduce the working week and introduce unemployment insurance, and which critics say have contributed to the economic slowdown by discouraging investment, Mr Lagos has enacted new legislation to deal with the country's rising tax evasion levels.

At present, estimates suggest that Chile loses at least a quarter of its tax revenues as a result of tax evasion. Although this is not bad compared to some other Latin American countries, Mr Lagos stresses that it falls far short of European or American standards, and so is unacceptable. 'If you want to be a serious country, that is part of the story you have to develop,' he said.

However, the Socialist government has included some sweeteners in its reform package, most notably changes to securities and capital markets laws, which should ensure that it is cheaper to trade shares and raise capital.

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