MONGABAY.COM
Mongabay.com seeks to raise interest in and appreciation of wild lands and wildlife, while examining the impact of emerging trends in climate, technology, economics, and finance on conservation and development (more)
WEEKLY NEWSLETTER
|
|
Chile
Index
In seeking funding for new social programs, the Aylwin
government made clear immediately that the only way of
increasing
social spending without generating unsustainable
macroeconomic
pressures was by finding secure sources of government
revenue.
Economists associated with Alywin's CPD coalition
calculated in
1989 that in order to implement their antipoverty social
programs,
annual funds on the order of 4 percent of GDP would be
required.
They argued that these resources could be obtained through
a
combination of expenditures, reallocation, foreign aid,
and
increased tax revenues. In order to implement these
programs
rapidly, in April 1990 President Aylwin submitted to the
newly
elected Congress a legislative proposal aimed at reforming
the tax
system. The main features of the package were the
following: the
corporate income-tax rate was to be increased temporarily
from 10
percent to 15 percent for 1991-93; and the tax base, which
in 1985
had been defined as distributed profits, was to be
broadened to
include total profits. The progressiveness of the personal
income
tax was to be increased by reducing the income level at
which the
maximum rate was applicable; and the rate of the
value-added tax
(
VAT--see Glossary) would
be increased to 18 percent from
16
percent. During most of the Pinochet government, the VAT
rate had
been 20 percent. It was only reduced to 16 percent prior
to the
electoral contest before the plebiscite on Pinochet's
continuation
in power. After intense and often frustrating negotiations
between
the Aylwin administration and the opposition, the tax
reform was
approved in late 1990.
Pinochet's labor reforms of 1978-79 had been, from the
beginning, strongly criticized by the opponents of the
military
regime. Although the 1979 decrees had modernized labor
relations in
some areas, they had also severely limited the activities
of unions
and, as initially conceived, had made real wage rates
unusually
rigid. Reforming the labor plan was an important priority
of the
new democratic government.
After the support of some opposition senators was
obtained, a
mild labor reform was passed in 1991. An important
characteristic
of Chile's constitution of 1980 is that it stipulates the
seating
of nine nonelected senators in the legislature's upper
house, as
well as former presidents and former justices of the
Supreme Court.
The CPD coalition lacked a parliamentary majority because
the
nonelected senators had been appointed by Pinochet.
Consequently,
in order to approve legislation it had to obtain support
from the
opposition for some measures.
The new labor legislation restricted the causes for
firing
employees, increased the compensation that firms had to
pay to lay
off employees, and restricted employers' recourse to
lockouts.
Although there was little doubt that these new regulations
had
increased the cost of labor, it was too early to know the
effect of
the new legislation on job creation. It was known,
however, that
the reform of labor laws by a democratically elected
government had
greatly legitimated the modernization of labor relations.
In a way,
the concept of labor-market flexibility had ceased to be
associated
exclusively with the authoritarian military regime and had
become
generally accepted by the population at large.
Data as of March 1994
|
|