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Chilean Firms Face Complex Tax Regime Changes

by Mike Godfrey, Tax-News.com, Washington

10 August 2015


The International Monetary Fund (IMF) has said that the complexity of Chile's new tax regime is likely to have a negative effect on economic activity in the short-term.

Chile implemented a package of tax reforms at the beginning of this year with the aim of increasing tax revenue by USD8.2bn (three percent of gross domestic product) to fund free education for all and other social projects. The reforms include gradual increases in capital income taxation.

The IMF said in its 2015 Article IV consultation report for Chile that the reforms have the potential to boost productivity and GDP growth if well implemented. However, it said that the higher cost of capital resulting from the reforms is likely to have a negative short-term impact on activity.

According to the report, the Chilean Government intends to simplify the tax reform by providing more guidance to firms, and is preparing a new fiscal responsibility law that would strengthen the role and governance of the Fiscal Council.

The Fund said that Chile's structural deficit in 2015 is expected to be about 2.75 percent of GDP, compared with 1.1 percent in the last Budget.

TAGS: tax | Chile | law | International Monetary Fund (IMF) | corporation tax | education | tax reform | individual income tax

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