An in-depth look at the Boric tax reform proposal

During the first few months of Gabriel Boric’s presidency, the constitutional reform process dominated Chile’s political agenda. But whether the new proposed Constitution is approved or not, the government seeks to push through other key initiatives.

Chief amongst them is a tax reform proposal introduced last week by Finance Minister Mario Marcel, which aims at turning Mr. Boric’s campaign promises about expanding the country’s welfare state into an economically viable proposition, by significantly raising public revenue.

Mr. Boric’s team targets an increase of 5 percent of GDP in tax revenue — roughly USD 15 billion per year — and wants to take advantage of the reform to improve income distribution, close tax loopholes that delegitimize the system, and add costs to activities that contribute to pollution or take a toll on surrounding communities.

Almost one percentage point of that target was already secured earlier this year, when a government initiative to secure funding for its Guaranteed Universal Pension (PGU) scheme was passed in Congress, and Mr. Marcel is now looking to push through changes that increase revenue by another 4.2 percent of GDP over the next four years.

The goal, the government says, is to reach taxation levels around those of the average member of the OECD — the organization of developed countries — which stands above 30 percent of GDP.

That new money should come from a gradual increase in proceeds from individual (1.5 percent of GDP)...