The arguments of the PPD to reach an agreement with the Treasury for tax invariability

In a significant political move, the national leadership of the Partido por la Democracia (PPD) has confirmed its intention to challenge the government's major tax reform before the Constitutional Court (TC), despite an agreement reached between the party’s senatorial bloc and President José Antonio Kast’s administration regarding the issue of tax invariability. This decision comes after the PPD senators had initially agreed not to contest the specific provisions related to tax invariability, which sparked criticism from opposition groups. The PPD clarified in a public statement that their stance against the broader megareform remains unchanged, emphasizing that the agreement with the government was limited to improving the tax invariability proposal. They stated that there were no significant changes made by the executive on other aspects of the reform.

The PPD’s declaration highlighted that while they have reached an agreement with the government concerning the duration of tax invariability, this does not imply approval of the entire megareform. The party’s leadership expressed concern over the potential regression of social rights achieved by the country and reaffirmed their commitment to promoting the social invariability project proposed by the parliamentary bloc. This position was met with strong criticism from within the PPD itself, particularly from the Youth Wing of the party, which issued a statement rejecting the support given by the senatorial bloc to the National Reconstruction Law, also known as the megareform under President Kast’s government.

The Youth Wing argued that decisions of such importance should reflect the mandates and convictions of the citizens rather than personal interests unrelated to the common good. They further claimed that the project did not guarantee the economic growth promised by the government. Similarly, the Councilors' Bloc of the PPD expressed deep disappointment with the agreement signed by their parliamentarians regarding the so-called megareform. They emphasized that while dialogue and consensus-building are essential in politics, these should not come at the expense of abandoning the principles that formed the foundation of their political project.

The Metropolitan Regional Leadership of the PPD voiced profound concerns about how this decision was handled, expressing worry about the political, organizational, and communicational impact of the decision-making process. They pointed out that although seeking conditions to improve a flawed project is understandable, such decisions should not be made without prior consultation with the National Direction, Political Commission, and the party's grassroots members. They noted that this situation could damage the party's image, especially during a period when the PPD aims to rebuild its credibility and reconnect with its base.

The PPD senators explained their rationale for reaching an agreement with the government regarding the tax invariability clause. In a joint statement titled "Chile cannot continue administering poverty," the senators emphasized the need for Chile to grow again, highlighting that without investment, new jobs would not be created, salaries would not increase, and resources for better pensions, health, education, or security would not be generated. They stressed that managing poverty should not be the path forward, and instead, the focus should be on creating conditions for the country to develop with clear rules, responsibility, and always safeguarding public interest.

They indicated that during the discussion of the reconstruction project, the PPD senators managed to make fundamental changes to the government's proposal. Their objective was clear: to attract investment to promote growth but avoid granting privileges without controls or limiting the state's powers. The senators emphasized that the tax stability for companies would not be free, explaining that firms wishing to access the tax invariability regime must pay an additional surcharge of 1.5% on corporate taxes, which was not included in the original proposal.

This mechanism, according to the PPD senators, is balanced, allowing the state to provide stable rules for investment while requiring companies to contribute more to fiscal revenue. They pointed out that the agreement results in fewer years of tax invariability and more investment for regions. The deal established a proportional system based on the size of the investment, specifying that investments between $50 million and less than $100 million can access a 10-year invariability regime, while those between $100 million and less than $350 million will have a 15-year period. Only investments exceeding $350 million can access up to 20 years of invariability.

The PPD senators also clarified that the agreement does not freeze all taxes. They mentioned that companies benefiting from the arrangement will not be protected from future changes in taxes such as VAT, mining royalties, green taxes, or municipal levies. Additionally, they will not be exempt from new obligations with the Internal Revenue Service (SII) or norms aimed at combating tax evasion. This means the state retains its ability to strengthen environmental protection, enhance tax oversight, combat evasion, modify mining royalties when necessary, update pension obligations, or establish new control tools by the SII, and require companies to disclose the origin of their funds.

The agreement reached by the PPD senators with the government has drawn critical responses from the Socialist Party (PS), which reaffirmed its rejection of the megareform and its decision to proceed to the Constitutional Court (TC). The PS leader, Nelson Venegas, stated that the party’s stance remains unchanged, emphasizing that the reform contains constitutional flaws and is detrimental to Chile. He reiterated the PS's resolve to go to the TC, hoping to gain more support from other opposition parties, especially following recent statements from the PPD.

Venegas concluded by calling the reform a poor one for Chile and unconstitutional. Another prominent figure from the PS, Daniel Manouchehri, criticized the PPD even more harshly, stating that tax invariability is a lock on privileges for the ultra-rich and accusing the PPD of signing it in the arms of Minister of Finance Jorge Quiroz. He expressed confidence that other parties would follow suit in challenging the reform before the TC.