Acosta-Ormaechea, S. and Yoo, J., 2012. “Tax Composition and Growth: A Broad Cross Country Perspective,” IMF Working Paper WP/12/257.
Adan, H., Bedhat, J. M., Soon Chang, E., Gavin, E., Gueorguiev, N., Honda, J. and Nose, M., forthcoming. “Revisiting the Revenue Gains from Tax Administration Reforms,” forthcoming IMF Working Paper.
Martínez-Aguilar, S., Fuchs, A., Ortiz-Juarez, E., and Del Carmen, G., 2017. “The Impact of Fiscal Policy on Inequality and Poverty in Chile,” CEQ Working Paper WP 46.
Akitoby, B., Baum, A., Hackney, C., Harrison, O., Primus, K., and Salins, V., 2018, “Tax Revenue Mobilization Episodes in Emerging Markets and Low-Income Countries: Lessons from a New Dataset,” IMF Working Paper WP/18/234.
Hadzi-Vaskov, M. and Ricci, L., 2021. “ Understanding Chile’s Social Unrest in an International Perspective,” IMF Working Paper WP/21/174.
Soon Chang, E., Gavin, E., Gueorguiev, N., Honda, J., 2020. “Raising Tax Revenue: How to Get More from Tax Administrations?,” IMF Working Paper WP/20/142.
Prepared By Eduardo Camero (FAD)
Total tax revenue is taken from the IMF World Revenue Longitudinal Database (which prioritizes data from the OECD Global Revenue Statistics Database for OECD countries) and includes all major taxes, such as on personal and corporate income, goods and services (including value added), property, payroll, trade, and other or unidentified. It does not include social security contributions.
See also Annex IX in Chile Staff Report for the 2022 Article IV Consultation.
Although data is available for 2020 (and in some cases for 2021), they are likely to be affected by the COVID-19 pandemic and are not included in the sample.
In addition, an episode must start with a positive increase in the tax-to-GDP ratio.
Revenues from mining do not necessarily have a direct relationship to GDP, as do tax revenues, so they are better assessed on a project-by-project basis. Corrective, or excise taxes, can be relatively well estimated using the characteristics of the tax (i.e., for the carbon tax, the amount per ton of carbon content in a fuel), the consumption of the excisable good (i.e., consumption of fossil fuels), and the behavioral response (i.e., the price elasticity of consumption of fossil fuels), so there is less need to do an international benchmarking. See 2022 Selected Issues Paper Climate Policies for a Successful Green Transition for an assessment of revenue increases from green taxes and other climate policies.
Those results are not directly applicable to the benchmarking exercise, as they estimate the effects of stronger tax administration on total tax revenue, including most importantly VAT revenue. In addition, Chile already has a mature tax authority, and VAT revenues are high.
The consolidation effort on the basis of the headline fiscal balance is closer to 3 percent of GDP.
The PGU entails additional spending of 2.2 percent of GDP, financed by a rationalization of tax exemptions introduced in 2022 (0.6 percent of GDP) and the discontinuation of the solidarity pension (1.1 percent of GDP). The expansion proposed in the draft pension reform would cost an estimated 0.44 percent of GDP per year.
The additional spending in the PGU estimated in the financial report that accompanies the pension reform (“Informe Financiero No.201/07.11.2022”, table 14, page 29) is 1,531 billion CHP (in real 2022 CHP) for 2027. Assuming the same inflation rate and GDP path as in the macroeconomic framework for the 2023 Budget, the estimated cost is about 0.44 percent of GDP.
The Ministry of Finance estimates the tax and spending reform could increase GDP per capita by 1.8 percent over the medium term, with a negative effect of 2.7 percent from higher taxes and a significant and positive effect of 4.5 percent from additional social and other spending.