Chile: Selected Issues

This Selected Issues paper focuses on Chile’s tax reform scenarios in international perspective. While the economic and social outcomes achieved by Chile have been impressive, important social challenges lie ahead. This paper benchmarks the estimated revenue gains of the tax reform proposal and discusses different fiscal consolidation scenarios. The paper also presents the stylized facts of the tax system in Chile compared with The Organization for Economic Cooperation and Development (OECD) countries. Following a very brief overview of the tax reform proposal, the paper also presents a benchmark analysis of the estimated revenue yields against similar domestic revenue mobilization episodes in OECD countries. The authorities are firmly committed to their medium-term fiscal consolidation plan. The tax reform is needed to finance social spending and meet the authorities’ fiscal consolidation plan. It is also important to consider that the increase in taxes will have implications for growth, with the effect depending on the final composition of the tax and spending reforms.