TAX CUTS = AUSTERITY
Chile’s President José Antonio Kast has unveiled an ambitious package of more than 40 economic and regulatory reforms aimed at breaking what he described as a decade of stagnation, but the proposal has already triggered political resistance and street protests as it moves towards Congress.
The plan, branded the “Law on Reconstruction and Economic and Social Development”, combines sharp corporate tax cuts, regulatory easing and public spending restraint with incentives designed to attract investment and formalise employment. Kast presented the initiative during a nationwide address from the presidential palace in Cerro Castillo, framing it as a break from what he called years of fiscal drift and underperformance.
At the centre of the proposal is a reduction in corporate tax from 27% to 23%, a measure the government argues will bring Chile closer to the OECD average and unlock investment across roughly 150,000 firms that account for more than half of formal employment and the bulk of domestic investment. The administration also proposes a temporary VAT exemption on new housing sales, a 7% levy on repatriated capital for a limited window, and long-term tax stability guarantees of up to 25 years for major investors.
Kast set out macroeconomic targets of 4% annual growth and unemployment falling to 6.5% by 2030, alongside fiscal balance. Chile’s economy expanded 2.5% in 2025, while inflation ended the year at 3.5% and the structural deficit reached 3.6% of GDP, its highest level in two decades.
The president has argued that investment certainty and lower taxation are essential to reversing weak productivity, insisting that growth is the only sustainable route to higher employment and social stability. He also announced plans to accelerate environmental permitting, cutting approval timelines and limiting the scope for administrative challenges that can delay infrastructure and energy projects.
The announcement came against a backdrop of rising political tension. On April 15 evening, small-scale cacerolazos were reported in parts of Santiago as the televised address was broadcast, reflecting unease among opposition groups and civil society over both the tax cuts and broader governance direction. Critics from left-wing parties accused the government of advancing a “disguised tax reform” that would disproportionately benefit higher earners and deepen fiscal pressure.
Opposition parties in Congress have signalled resistance, particularly to the corporate tax reduction, with some lawmakers warning they may challenge aspects of the bill at the Constitutional Court if it is not split into separate legislative proposals. The government, however, insists the package must be treated as a single, integrated reform to achieve its growth objectives.
Alongside economic measures, Kast highlighted tightening migration enforcement, including expanded border controls and deportation operations. The administration said the first removal flights would depart on April 16, targeting undocumented migrants, as part of a broader security and migration agenda.
Fiscal consolidation is another pillar of the plan, with a 3% reduction in ministerial budgets and efforts to contain public spending growth. Officials argue this is necessary to restore credibility after repeated deviations from fiscal rules in recent years.
The political battle now shifts to Congress, where the government lacks a clear majority and will rely on cross-party support to advance the legislation. Business groups have cautiously welcomed the focus on investment and regulatory reform, while opposition leaders argue the measures risk worsening inequality without guaranteed fiscal offsets.
Kast has urged legislators to treat the reform with “urgency and responsibility”, insisting it is designed to restore growth, employment and long-term economic confidence.
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