The presidential runoff election is tomorrow, Dec. 19. Chile’s economy has been growing exponentially despite a tough year as reported by the Central Bank. In an intense race to the finish, what do candidates Gabriel Boric and José Antonio Kast have to say about their economic policies?
Despite a global pandemic, Chile’s economy in 2021 has been picking up strength with the Central Bank reporting seven consecutive months of increase in economic expenditure. Whether it be agriculture, public consumerism, or the national gross domestic product (GDP), this rapid growth has broken records across the board in the last two quarters. Here is a look at what Chile’s future president has to offer in terms of economic policies.
It may not be surprising that the left-wing candidates’ economic policies include higher tax rates for high-income earners and nationalizing services, but what may be surprising is that his proposed policies may not be able to keep up with the rapid economic growth of the nation.
Boric’ first economic policy is to redesign work benefits such as severance insurance so that it extends to those with long periods of unemployment in between jobs. He also plans to invest in public housing, schools, residential centers, and prisons.
At the same time, those whose monthly earnings are more than CLP$4.5 million (US$5,355) will be taxed at a higher rate. Earners in this income bracket make up 1.5 percent of the country’s taxpayers. Boric hopes that imposing higher taxes on them will be the foundation of a stable tax system that does not have to rely on value added tax (VAT) accounting for a large percentage of its revenue. Currently, VAT contributes up to 40 percent of tax collection in Chile. The new tax regime is projected to increase GDP by one percent over four years.
In a bid to have a “more progressive and equitable” tax system, Boric also aims to reduce exemptions that he claims mostly benefit those with the highest income. Some exemptions that will be cut include being able to carry over tax-losses from prior years. The reduction of exemptions is estimated to add an additional one percent to GDP.
Boric also wants to establish a National Development Bank (NDB) that would specialize in credit and serve as a financing fund. The NDB would grant capital to innovation companies. Boric hopes that the bank will be run with both “specialized and independent” corporate governance.
José Antonio Kast
Kast’s program looks to put the economy “back on its feet” with policies that seek to halve gross public debt during his time in office. To start this recovery, the Republican Party candidate proposes to reduce corporate tax, which he claims “negatively” affects Chile’s competitiveness in international markets.
Opting for a more conservative fiscal approach, the private sector’s role will grow with the creation of entities that stimulate local entrepreneurs and act as start-up hubs. Kast hopes that, by working with the private sector and universities, small businesses and start-ups will be able to grow and develop with the support of the state and not “in spite of it.”
Unlike his left-wing opponent, the right-wing hopeful proposes a huge increase in public infrastructure from private investment. Kast hopes that the increase in private investment funding can contribute to his “sustainability, justice, and territorial equity” plans.
Included in his economic policies is a plan to introduce compulsory economic studies in secondary education so that young people are prepared “to make good decisions” concerning their finances, particularly around savings and debts. Kast seeks to protect young people from financial abuse and scams.
Similarly to Boric, Kast also promises to review and cut some tax exemptions in order to reduce tax avoidance as well as reform the tax system.
Emmanuela is an International Relations and Modern Languages student from the Univeristy of East Anglia. Human Rights is of key interest to her as are culture, politics and sports.