(Bloomberg) -- Chile’s congress approved a new tax bill presented by the administration of President Sebastian Pinera to fund its social agenda and ease months of social unrest.
The bill was unanimously approved in the Senate Wednesday evening, and in the lower house earlier. It’s passage through congress had been delayed last week in a dispute over the details of a new tax on polluting companies.
Former Finance Minister Felipe Larrain was pushing a tax reform early last year that would have cut levies on the rich in an attempt to boost economic growth. That proposal was ditched when the country erupted into anti-government riots in October. After the unrest had peaked, Larrain was replaced by Ignacio Briones, who presented the new bill that aims to boost tax revenue and fund the social agenda.
“We now have a better and more efficient tax system,” Briones said. “This reform was a product of a broad political agreement and that is good news for Chile.”
The bill will now be reviewed by the Constitutional Court before it can be enacted in March.
The new bill will raise as much as $2.2 billion in funds per year. Among other measures, it will create a property tax for dwellings valued at more than 400 million pesos ($505,000), create a new income tax bracket of 40% for people earning more than 15 million pesos per month, and gives incentives to small- and medium-sized companies.
The government unveiled a $5.5 billion stimulus package last month to counter the economic effects of the unrest, which will be funded with debt and assets from its sovereign wealth funds. Chile’s debt-to-GDP ratio will increase to 38% by 2024 from about 26% at present. The country’s fiscal deficit may reach 4.7% this year, Briones says.
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