Chile Passes Kast Tax Cuts, Investor Guarantees in Tight Vote
Chile’s Senate has narrowly approved President Kast’s flagship economic reform, offering foreign investors up to 20 years of tax stability but risking fiscal targets amid a fragile political majority.
Chile’s Senate approved the core articles of President José Antonio Kast’s economic overhaul in a marathon overnight session, advancing the legislation to a final legislative hurdle. The "National Reconstruction and Economic and Social Development" bill passed general approval by a 26-23 vote with one abstention, while key tax provisions survived a tie-breaking 26-24 margin.
The centerpiece of the reform slashes the corporate income tax rate from 27% to 23% in stages by 2029, at an estimated annual cost of US$1.8 billion. The government estimates the cut targets roughly 150,000 firms responsible for 90% of national investment and over half of formal employment.
For major capital deployments, the bill establishes a tiered tax-stability regime freezing rates for large projects. Investments between US$50 million and US$100 million receive 10 years of stability, scaling up to 20 years for projects exceeding US$350 million in sectors like mining, energy, and infrastructure.
The package represents one of Latin America’s most aggressive pro-business pivots, designed to reverse an economy that has contracted for five consecutive months and confront 9.4% unemployment. Markets have responded positively, with the Chilean peso appreciating 0.7% following favorable electoral outcomes for Kast’s coalition, alongside improved sentiment in local stocks and bonds.
However, the narrow one-vote majority raises questions about the reform's durability if the political balance shifts. Both the IMF and Chile’s Autonomous Fiscal Council have warned that the tax cuts threaten fiscal targets unless compensatory measures are introduced, and left-wing opponents have flagged potential constitutional challenges against the long-term stability guarantees.
Beyond corporate relief, the bill eliminates the 10% tax on profits from publicly traded share sales to bolster market liquidity. It also includes a temporary VAT exemption on new home sales, a payroll tax credit for roughly 4 million workers, and 400 billion Chilean pesos for wildfire reconstruction.
