U.N. body calls proposed Chile tax reform 'very positive'
SANTIAGO, Dec 11 (Reuters) - Chilean presidential frontrunner Michelle Bachelet's proposed tax reform is good news for the Andean nation and would bring the tax rate closer to that of developed nations, the head of the United Nations' regional economic body said on Wednesday.
Former center-left president Bachelet, who is favored to win re-election on Sunday, has promised to push through tax reform within the first 100 days of taking office, as a way to fund an education overhaul.
"The fact that there could be a fiscal reform could be very positive," Alicia Barcena, the head of Santiago-based ECLAC, told journalists when asked if the proposals might have spooked investors and weighed on economic growth forecasts for next year.
"Developed countries have tax rates of over 30 percent ... and what is being proposed is precisely a fiscal reform that will place Chile closer to developed nations," she said.
Among other things, Bachelet's proposal calls for gradually raising the corporate tax rate to 25 percent, from 20 percent currently, and getting rid of the so-called FUT (Fondo de Utilidades Tributables), a mechanism companies can use to gain tax exemptions on part of their profits.
Referring to the tax reform proposal, Finance Minister Felipe Larrain said on Monday that "it does not stimulate investment, on the contrary it hurts it." He said investment had decelerated significantly since the proposal was announced.
ECLAC on Wednesday forecast that Chile's economy will grow 4.0 percent in 2014, following an estimated 4.2 percent expansion this year.
A nearly 10 percent drop this year in prices for copper, Chile's top export, as well as softer external demand and reduced spending on reconstruction efforts following a deadly 2010 earthquake were most likely to blame for the slowdown, Barcena said.
There was no evidence that the announcements on tax reform had influenced how the economy was performing, she said.
(Reporting by Anthony Esposito; Editing by Vicki Allen)