The slogan: Chile has three times less tax compliance than the European Union average, for example, regarding the payment of VAT. Hence, the Executive wanted to face the problem, including new regulations that are reflected in a project approved today by the Chamber of the Chamber (120 votes in favor, 18 against and 3 abstentions) and sent to the second step in the Senate. .
The Minister of Finance, Mario Marcel, celebrated the approval of the project in the Chamber: “A red light went on for those who abuse the country through tax evasion and avoidance. This is a signal for taxpayers who comply with their obligations, since what this project indicates is that they will no longer have to fear the competition of those who fail to comply with their tax obligations.”
And the goal is to reduce the percentage of tax non-compliance and thereby increase tax collection. With these resources, it is expected to finance, mainly, two subjects:
- Increase in the Universal Guaranteed Pension (PGU) to $250 thousand, with an increase in coverage of 166 thousand people by 2030.
- Expenditure aimed at strengthening public security (increase in investment by 40% compared to 2022). Within this framework, it is expected to invest in crime prevention, the fight against organized crime and the effective functioning of the administration of justice.
The proposal, framed in the Fiscal Pact Plan of the Government of President Gabriel Boric, seeks to modernize the tax administration (SII, Treasury and Customs). Also from the tax and customs courts and the Taxpayer Ombudsman’s Office. This includes the best use of available technologies and new tools in the field of inspection. Likewise, increase in staffing.
Along with the above, progress is being made in controlling informality, especially on a large scale. Data provided in the process indicate that more than one million microenterprises have not started activities in the SII.
Likewise, an update of tax crimes is carried out and some of the penalties are increased. Among the latter are those corresponding to the use or provision of false tax documents. Added to the above is the introduction of the figure of substantial collaboration, to encourage self-reporting; and the anonymous complainant.
Anti-Circumvention
At the same time, we seek to combat aggressive tax planning. Within this framework is the modification of the general anti-avoidance rule at two levels:
- Substantive modifications are proposed that seek to establish a clear framework for the range of application of this standard. Thus, when and how it is applied is regulated. In addition, the form of interaction with the special anti-avoidance rules is made explicit.
- The application of the general rule is made explicit to operations that consist of a set of acts in which, despite the fact that one or more of them are subject to a special rule, the application of the general rule must be allowed since aggressive planning is only can establish and prove by observing the facts as a whole.
Other elements addressed refer to a restructuring of the appraisal standard and business reorganizations; qualification of abuse or malingering; international taxation (tax havens); inheritance and gift tax; the procedure for lifting banking secrecy is modified; and regulation of tax obligations (includes flexibility for signing payment agreements and a special regime for MSMEs).
Modifications and tax effect
During the process carried out in the Finance Commission, whose report was submitted by Deputy Agustín Romero (REP), various amendments and clarifications were introduced to the regulations. Many of them were due to agreements reached between the Government and the deputies to make the approval of the proposal viable.
Among the matters are improvements to tax regulations, for example, regarding notifications and related parties. Also, in relation to revocable donations, term of transfer, measures against informality, VAT refund, real estate appraisal claim, anonymous tax whistleblower, appraisal and reorganizations, passive income abroad and tax havens.
Other changes targeted banking secrecy (it will require judicial authorization) and the general anti-avoidance rule. Regarding this last point, clarifications were made to the burden of proof on the part of the SII and the intervention of the Consultative Advisory Council.
Additionally, the positions of department subdirectorates were incorporated into the Senior Public Management system. Along with this, some subdirectorates (already functioning) of the SII are legally formalized and the Committee for Cases of Institutional Interest is created.
The initiative considers increased tax collection, which ranges from 0.59% of GDP, in 2024; at 1.47% of GDP, in regime (from 2027). The most significant contribution will come from business groups, high net worth and VAT gaps and informal trade.
Now, this project also includes expenses. This is derived, in particular, from the institutional strengthening in the SII, Customs, Treasury and Taxpayer Ombudsman’s Office. Under the regime, fiscal spending will reach $81,10 million. $146 million annually must be added to this amount for remuneration of the Consultative Advisory Council, an issue added in the process.
Discussion of the tax compliance project
Except for the representatives of the Republican Party, the other speakers announced their support for the legal proposal. The greater tax collection for purposes such as pensions and security was valued. Also advance in combating organized crime and strengthening oversight institutions.
Likewise, there was support for a reduction in tax evasion and avoidance. It was estimated that these actions go against social justice and promote inequality in the country. Thus, many highlighted the need for tax compliance. However, there were nuances regarding some rules.
The RN and the UDI recognized the Government’s approach, but observed that some objections remained. Among the topics mentioned were some regulations of the general anti-avoidance rule, the figure of the anonymous whistleblower (particularly the reward for whistleblowing) and the way in which the lifting of banking secrecy will be defined.
In contrast, the ruling party and center considered that these points are relevant to advance in tax justice. Thus, they called for the regulations to be approved in the form sent by the Finance Commission.
For their part, Republicans said that the Government was not open to their proposals. They criticized that tools are defined that go against entrepreneurs. And a setback was accused in terms of tax avoidance. “It is a step towards an intrusive and controlling Government,” he stated.
Executive and voting
Minister Marcel asked to dispatch the proposal “without gaps”, pointing to an eventual contrary vote on some articles. In addition, he supported his intervention by linking the regulations addressed with criminal cases currently in judicial process. For example, he cited megatax fraud that, according to him, could have been detected early with the lifting of banking secrecy.
Finally, he stressed that tax compliance responds to how close one is to collecting what should be collected according to the existing legislation. And, in this context, he clarified that non-compliance occurs due to evasion, avoidance and ignorance
“This is a project that takes care of all three elements and, therefore, not only includes sanctions, but also support for taxpayers so that they can comply with their obligations and flexibility so that defaulters can catch up” , he detailed.
At the time of voting, the text was approved in its idea of legislating, both in its general rules and quorum.
Then, the voting took place in particular, where the bulk of the matters were ratified in the terms proposed by the technical commission. Only four subjects were rejected in this context. Three of them referred to aspects of the process carried out in statements of abuse or simulation. The fourth pointed to formal aspects of the taxpayer’s claim that opposes the delivery of banking information (competent court, procedures, etc.).