Senate Approves Key Provision of the Mega-Reform to Compensate Municipalities for Tax Exemptions

The bill aims to restore municipal revenue following the tax cut for people over 65, a move that has sparked intense debate among municipal leaders from both the ruling party and the opposition. The Senate approved the executive branch’s latest amendment as part of the Mega Tax Reform, a measure designed to restore municipal funds in light of the tax exemption for people over 65. The vote, scheduled for 4:00 p.m., resulted in the following tally: 27 in favor, 22 against, and one invalid vote. The formula proposed by La Moneda calls for allocating 65% of the funds to the Municipal Common Fund and 35% directly to local coffers. Government officials defend the measure’s neutral impact. “All this regulation does is fully compensate municipalities for any effect the property tax reduction may have on their revenues,” stated Finance Minister Jorge Quiroz. However, the initiative divided local leaders. The mayor of Maipú, Tomás Vodanovic, described the day as “a dark day for local government” and called on senators to reject the bill to demand a more equitable compensation mechanism. In this regard, more than 100 mayors from different municipalities across the country asked President José Antonio Kast to modify the compensation formula proposed by the government in light of the property tax exemption. In light of this situation, the signatories propose that the USD 200 million earmarked to compensate for the loss of municipal revenue be transferred in full to the Municipal Common Fund. On the other hand, Santiago Mayor Mario Desbordes called on the ruling party to defend its position without distorting the truth. Meanwhile, in Providencia, Mayor Jaime Bellolio dismissed claims that the measure is regressive and called for its final approval. As an alternative funding source, Huechuraba Councilman Maximiliano Luksic proposed allocating vehicle registration fee payments to the municipal solidarity fund to bolster revenue for lower-income municipalities. The Senate approved the Executive Branch’s latest amendment as part of the Tax Megareform, a measure designed to restore municipal resources following the tax exemption for individuals over 65. The vote, scheduled for 4:00 p.m., resulted in the following tally: 27 in favor, 22 against, and one invalid vote. The formula proposed by La Moneda calls for allocating 65% of the funds to the Municipal Common Fund and 35% directly to local coffers. Read more Government officials defend the measure’s neutral impact. “All this regulation does is fully compensate municipalities for any effect the property tax reduction may have on their revenues,” stated Finance Minister Jorge Quiroz. However, the initiative divided local leaders. Мэр Майпу Томас Воданович назвал этот день «мрачным днём для муниципального самоуправления» и призвал сенаторов отклонить законопроект, чтобы добиться введения более справедливого механизма компенсации. В связи с этим более 100 мэров различных коммун страны обратились к президенту Хосе Антонио Касту с просьбой изменить формулу компенсации, предложенную правительством в связи с освобождением от налогов. В связи с этой ситуацией подписавшие обращение предлагают, чтобы 200 миллионов долларов США, предназначенные для компенсации потери муниципальных доходов, были в полном объеме перечислены в Общий муниципальный фонд. С другой стороны, мэр Сантьяго Марио Десбордес призвал представителей правящей партии отстаивать свою позицию, не искажая фактов. Между тем мэр Провиденсии Хайме Беллолио опроверг регрессивный характер данного закона и призвал к его окончательному утверждению. В качестве альтернативного источника финансирования мэр Уэчурабы Максимилиано Луксик предложил направлять поступления от сборов за разрешения на движение в муниципальный фонд солидарности для укрепления бюджетных поступлений коммун с наименьшими доходами.