Chile: Technical Assistance Report—Assessment of Tax Expenditures and Corrective Taxes published by IMF/OECD (2020)
Chile follows international best practice in fiscal management by calculating the tax revenue foregone from a wide range of Tax Expenditures (TEs) and presenting these to Congress on an annual basis. Overall, the methodology applied by the tax administration (Servicio de Impuestos Internos, SII) to calculate TEs is aligned with practices in other OECD countries. Yet, the joint IMFOECD mission has identified scope for improvement and recommends that Chile:
Defines more explicitly a benchmark tax system against which to assess TEs. This report proposes a TE benchmark for the current tax regime (2020 onwards) that, for the income tax, combines a pure conceptual approach with a more pragmatic approach based on current tax law. The small business transparent regime and the partial dividend imputation regime are part of the benchmark, while the preferential regime for small firms is not.
Improves the quality of data used in TE estimations. A lack of data has been identified as a key obstacle to appropriate TE measurement in, for example, Free Trade Zones, capital gains on shares listed on the Chilean stock market, business income taxed under the presumptive regimes, rental income from DFL2 property and life insurance policies, among others.
