By Centro de Conocimiento Tributario (Tax Knowledge Center) - CCT

In the 2013 presidential campaign, then candidate Michelle Bachelet presented a Tax Reform proposal with measures to increase tax collection. After reaching La Moneda for the second time, in March 2014, the idea became a bill, which six months later was approved by Congress.

Thus, on September 29, 2014, Law No. 20,780 was published. Law No. 20,780 on Tax Reform, which introduced important changes to the Chilean tax system, redefining some of the pillars that supported it - taxation of corporate income, new regimes and the elimination of the FUTto mention a few - and tracing a different path to the one followed since the 1980s in the area of taxation.

Increased revenues

The 2014 Reform had several objectives; among them, to increase the tax burden to meet permanent expenses with permanent revenues, with an emphasis on education and other areas of social protection.

In order to achieve this collection focus, five major tools were established five major toolsTo achieve this, five major tools were established: raising tax rates, increasing the tax base, incorporating anti-avoidance rules, putting an end to tax benefits and creating new taxable events with special rates.

Graduality and the need to simplify

In terms of scope, Law No. 20,780 modified more than twenty legal more than twenty legal bodiesincorporating permanent and transitory norms. The latter, to harmonize issues that presented a marked before and after.

In addition, its provisions contemplated a gradual implementation, distributed in distributed over five years of implementation. five years of implementation (2014-2018), which made it even more challenging for taxpayers and the tax authority.

Along these lines, the magnitude of some changes created the need to simplify aspects that made their application difficult. With that objective in mind, at the beginning of 2016, the following was published Law No. 20.899, which introduced adjustments in several matters, being known as Simplification of the reform.

A decade of change

Since the Tax Reform, the Chilean tax system has undergone successive modifications, the most important of which are the following Tax Modernization of 2020 (Law No. 21,210) and Law No. 21,420 (2022), which reduces or eliminates tax exemptions to finance the Universal Guaranteed Pension. Universal Guaranteed Pension (PGU).

Today, the issue is back on the table with the draft bill of Tax Compliance and Fiscal Responsibility Law, promoted by the government and currently in the legislative process. The Government is currently in the middle of the legislative process.

The initiative seeks to increase tax revenues by 1.5% of GDP through three main channels three main waysThe initiative seeks to reduce tax evasion and avoidance, as well as informality, modernize the tax administration and strengthen the Taxpayers' Ombudsman's Office, among other provisions.