Chile's Tax Stability: A Call for Investment Certainty Without Surcharges

Chile is urged to reinstate tax stability to attract long-term investments, a feature previously offered by the DL 600 decree. The author, Jorge Claro Mimica, an engineer, proposes a system similar to the old DL 600, with varying contract lengths based on investment size. However, he criticizes the proposed permanent 1.5 percentage point surcharge on this stability measure. Mimica argues that tax invariability inherently increases project value by reducing the risk of regulatory changes after capital commitment, thereby encouraging investments that might otherwise be delayed, scaled back, or redirected elsewhere. He contends that the surcharge undermines this effect by diminishing project profitability and deterring investment. The true benefit to Chile, he states, is not an additional tax but the investment itself, which generates economic activity, jobs, exports, innovation, and future tax revenue. Specific contract durations are suggested: ten years for investments between US$10 million and US$20 million, fifteen years for US$20 million to US$50 million, twenty years for US$50 million to US$500 million, and twenty-five years for investments exceeding US$500 million. This guarantee should apply to both domestic and foreign investors and be renewable upon substantial new investment and fulfillment of original obligations. Chile faces stiff competition for capital from countries like Peru, Argentina, Brazil, Uruguay, and Australia, all offering contractual stability and long-term incentives. Mimica concludes that tax invariability, when applied generally, transparently, and contingent on actual investment realization, is a crucial tool for project execution, and charging for it may increase the tax rate but decrease the tax base.