President José Antonio Kast's administration introduced the National Reconstruction Law this Wednesday. Also known as the 'Miscellaneous Law' or 'Tutti Frutti' package, the proposal includes more than 40 measures aimed at revitalizing the labor market and reducing the tax burden on businesses.
Labor Minister Tomás Rau detailed that the project seeks to tackle the unemployment rate, which has remained above 8% for 38 months. The proposal includes incentives for hiring low-wage workers through a refund of up to 15% of the paid salary, applied as a credit toward monthly tax withholdings (PPM) or VAT.
According to estimates from the Ministry of Labor, this measure will have a fiscal cost of between US$1.2 billion and US$1.3 billion. Minister Rau preferred to characterize this expenditure as an "investment" due to the expected impact on employment.
"In Europe, these measures have been successful—obviously in some countries that are more developed than ours, such as Sweden and France—and they could generate a significant amount of employment. I don't want to commit to a specific figure right now," Rau stated in an interview with T13 Radio.
The legislative package also features a phased reduction of the first-category tax, dropping from the current 27% to 23%. The Executive branch aims for this cut to foster investment, adding a 12-month VAT exemption on home purchases and the elimination of the 10% tax on the sale of highly liquid stocks.
Reactions and Parliamentary Tensions
The proposal faces fierce resistance in Congress. Senator Daniel Núñez (PC) called the corporate tax cut "irresponsible" and warned of potential risks of social unrest.
"This supposed dogma—that lowering taxes leads to economic growth—is a dogma of ideological fanaticism that has no practical or real basis in the economies of these countries," the lawmaker argued during a conversation with Radio El Mostrador.
Núñez also criticized the management of the Kast administration, noting that the reduction in tax revenue could trigger instability. "What is being done is a great irresponsibility, because we are losing a very important source of funding, and we will therefore create widespread social conflict, which brings both social and political instability," he stated.
The senator also accused the administration of lacking sensitivity toward the working class: "I see it as very insensitive to the daily struggles faced by the people, the working class in Chile, the ordinary citizen. This is even reflected in the polls. Not only have we faced major issues regarding their promise to combat crime and increase security, but in parallel, they have created a new emergency today. The government created an emergency that the country did not have: an economic emergency caused by the rising cost of living."
Meanwhile, the People's Party (PDG) also expressed its opposition to the project unless negotiation tables are established. Congressman Juan Marcelo Valenzuela, the PDG floor leader, warned that they will not provide support if the law is forced through without prior dialogue.
"If they try to pass a 'Macedonian' law on us—trying to smuggle it through—under no circumstances will they have our votes. Not at all," Valenzuela told El Diario de Cooperativa.
The lawmaker denounced that the Executive branch has not held formal discussions with his sector and specifically criticized the measure to eliminate free university tuition for those over 30. "We find it a terrible idea and practically a direct attack on the middle class. For us, it is impossible to approve that," he noted.
The PDG proposed conditions for its support, such as reinstating the Tax Profit Fund (FUT) to encourage local reinvestment and the VAT refund on medicines and diapers. Regarding the tax cut, Valenzuela questioned its immediate effectiveness: "If the goal is to grow and energize the economy, I am not sure a corporate tax cut is the best tool. It might not take effect for another four or five years."
In terms of social policy, Minister Rau also announced that the 'Sala Cuna' (nursery/daycare) project will be resumed for implementation in the coming months, aiming to eliminate the current disparity that requires companies with 20 or more female employees to provide this service, but exempts those with 19 or fewer.