Chile Senate passes Kast's economic reform 26-24, bill returns to Chamber of Deputies for final review

The vote

After 12 hours of debate that stretched into the early hours of Thursday, July 16, the Senate approved the core articles of the "Law of Reconstruction and Economic and Social Development" by 26 votes to 24. The bill, which contains around 40 measures, now returns to the Chamber of Deputies for a final review on Monday and Tuesday, where the right-wing majority is expected to pass it. Opposition senators have vowed to challenge the law before the Constitutional Court.

Chile needs to grow and this project makes it possible.

What the reform contains

The centerpiece is a gradual reduction of the corporate income tax rate from the current 27% to 23% by 2029. The government argues this will attract investment and improve competitiveness. The bill also introduces tax stability guarantees for large investments: 10 years for projects between $50 million and $100 million, 15 years for those between $100 million and $350 million, and 20 years for investments exceeding $350 million.

Other provisions include compensation for companies whose environmental permits are revoked by courts, incentives for capital repatriation, a temporary VAT exemption for home purchases, tax benefits for seniors on their first property, and a "financial right to be forgotten" that removes prescribed debts from credit records after five years. The reform also streamlines permits for investment projects.

Economic backdrop

Chile's economy has been stagnant. GDP contracted 0.5% in the first quarter of 2026, after growing 2.5% in 2025, and economic activity has declined for five consecutive months. Unemployment reached 9.4% in the March-May rolling quarter, the highest since June 2021. The Central Bank projects growth of just 1% to 1.75% for 2026, while the government has lowered its long-term growth target from 4% to 3.5% by 2030. The IMF has said the project could stimulate growth but also pressure fiscal accounts.

Reactions and criticism

The opposition argues the reform favors the wealthy and will reduce state revenue. Senator Beatriz Sánchez said each percentage point cut means $420 million less for public coffers. Socialist Party president Paulina Vodanovic called it "the only tax reform that does not seek to collect more, but less." A Cadem poll found 56% of Chileans disagree with the tax cuts, and Kast's popularity has been declining. Political analyst Gilberto Aranda described the policy as a return to the orthodox neoliberal model of the late 1970s and early 1980s.

Each point that is lowered means $420 million less for state revenue.

This project is unprecedented. It is the only tax reform that does not seek to collect more, but less, and to reduce tax collection to provoke growth.

What happens next

The Chamber of Deputies will debate the amended bill on July 20 and 21. With the right-wing bloc holding a majority, approval is likely. The opposition plans to file a challenge with the Constitutional Court, which could delay implementation. For Kast, who took office in March promising an economic emergency program, the Senate vote marks his first legislative victory.