In the Finance Commission of the Chamber of Deputies, the discussion began this Monday, in particular of the tax reform, a bill that for the Government of President Gabriel Boric is essential in relation to the advancement of his program, and that will concentrate part of legislative work during the coming weeks in the National Congress. In this Monday’s session it was possible to approve a series of articles of the anti-avoidance agenda of the proposal, against which the minister of the branch, Mario Marcel, did not hide his optimism regarding the initiative reaching the Chamber of the Chamber to end of November.
Although Minister Marcel applauded the “dynamism” with which the members of the Finance Commission began voting on the emblematic project of La Moneda, in particular, opposition parliamentarians have noted that the discussion in the Lower House could extend beyond the plans of an Executive, which seeks to quickly overcome said obstacle to focus on obtaining the necessary votes in the Senate. In this way, and considering that the legislative body will meet only on Monday and Tuesday, from Chile Vamos they warn that the discussion could be delayed, affecting the plans of the Government, which seeks to close its first year of management with some concrete result.
It is a bill that, together with the reform of the pension system, has become the two main programmatic supports of President Boric’s management for the remainder of 2022, a period marked indisputably by the failure of the constitutional proposal in the exit plebiscite, which shook the panorama inside La Moneda and forced the ruling party to promote a new design of the program, which included a supposed greater empowerment of Democratic Socialism. The tax reform has been the biggest challenge for Mario Marcel, a respected economist and one of the best-reviewed ministers in the current cabinet.
But what began as the “most ambitious reform in history” in tax matters, has had to face a complex process of socialization with the business sector, from where the hypothetical weakening of investment is questioned, in addition to a legislative process that has not uncomplicated state. The deputy and member of the House Treasury Commission, Frank Sauerbaum (RN), who is also one of the authors of the various indications entered by the opposition to the bill during its discussion.
-What is the main reason that motivated you as opposition to vote against the idea of legislating this project?
-I think it’s a bad project, implemented at a bad economic time. We are in the middle of a recession – a situation that will worsen next year – with high levels of inflation, with unemployment increasing, with a very weak labor market, with high interest rates. In other words, we have a series of elements that make this a bad time to present a reform, injecting even more uncertainty, apart from the political uncertainty that exists even due to the constituent debate. Therefore, we believe that it is a reform that had an aspiration, which was to be able to collect a significant percentage of GDP, initially 4.2%, a figure that has been decreasing, because the Government has realized that we are not able to collect what had initially been defined.
-What do you think is the collection expectation of this tax proposal? Why does the opposition believe that this reform weakens the financial market?
-I think that we are going to be lucky enough to collect half of what was sought in the initial expectation, and the same thing that happened to former President Bachelet will happen to us, who wanted to collect 3% and ended up collecting 1 ,4%. Precisely because an absolutely tax-revenue reform was carried out, and that did not have any iota of motivation for investment and the generation of new labor sources and new investments. And it is precisely the criticism that we make of the current project, because we believe that there is a very big mistake in weakening the financial market, which is very weak after the 10% withdrawals, and today savings in Chile are very weak and that it means that we do not have financing sources to make the investment at a cheaper cost. Nowadays, when a company goes to ask for credit, it finds much more expensive credit, and that causes a lot of investments to be abandoned and finally causes companies to abandon projects, generating unemployment.
-From the right, they maintain that this reform has negative impacts on small businesses. What are your main arguments to support this hypothesis? Do you think there will be space in the Finance Commission to discuss these indications?
-Our main concern is to strengthen SMEs and cover the negative impacts that this reform could have, considering that small businesses are deprived of a series of tax benefits that they have today. And it seems to us that we are not in a position to weaken this sector, considering that we have been coming out of a recession from which we are getting up again, and that it has to face not only this tax reform, but also the 6% of extra contribution in social security matters, the tax on the minimum wage that has been increasing, and that will surely go up again in January, in addition to the reduction in the 40-hour working day.
So, the SME today is in a very complex scenario and, therefore, we presented a series of initiatives to protect it, but they were not voted on this Monday, where what was done was basically to start voting on the indications presented by the Government, which are indications that have to do with chapter three of the bill, related to tax avoidance and evasion. Many administrative issues are also being discussed, such as corrections to the Tax Code, and some things that have nothing to do with the substantive issues. What was part of the dialogue, in this Monday’s session, was the discussion about how Internal Taxes are given greater powers to be able to combat avoidance and evasion.
-Minister Mario Marcel has been optimistic, and even bet that at the end of November the project could eventually be voted on in the Chamber of Commerce. Do you think that the ruling party has the necessary votes to approve the project? Could the Government be more concerned about the subsequent processing in the Senate?
-I believe that in the Chamber it will not have the support that the Government expects today, where there are several deputies from center parties, such as the DC or the PDG, who have criticisms similar to those that we have raised. So, I think that the Commission is going to dismiss the project faster than it could be done in the Chamber, where, moreover, in the Senate the discussion is going to be even tighter, which precisely has caused annoyance in the deputies, because we see that the Government is going to reach an agreement in the Senate again without considering the proposals of the deputies. And that also generates an annoyance among us, because we know that finally what the Government can grant in this regard, it will do in the Senate and not in the Chamber.
-What is the opinion of the opposition regarding the role that Minister Marcel has played in the processing of this project?
-I think that Mario Marcel is very pressured by more radicalized sectors of the left, where, for example, we are very clear that the wealth tax proposed in this reform does not collect anything at all. In fact, of the ten people invited to the commission, nine said that it was a tax that caused capital to be diverted, that it did not collect anything and that it was a problem. But the Government maintains it precisely to give a signal to its political sector.
I believe that the Government, if it continues in this ideological logic, will permanently fail in Congress, and the same will happen in the reform of the pension system if it insists on a pay-as-you-go system. So, it is worrying to realize that the tax on the super-rich – which is now called the wealth tax – has failed all over the world and that we are going against the current, approving it to give a signal to the most radicalized sector of the left. So, it’s a mistake. And I think that Marcel has not known how to control that sector and has not really taken the reins, as expected.
-And finally, in the face of criticism regarding the weak legislative work of the Government and the questioned role of the outgoing Minister Jackson and the arrival of Ana Lya Uriarte to the General Secretariat of the Presidency (Segpres), have you observed a change in terms of generating dialogue between the Executive and Congress?
-The truth is that I did not have the pleasure of speaking with Giorgio Jackson and I have not had the pleasure of speaking with Ana Lya Uriarte, so they have not done a very different job until now. I am a member of the Labor Commission that is now going to vote on the pension reform, in addition to the Treasury Commission, and they have never spoken to me, so I think that the work has not been carried out correctly.
