KVIG Informative

José Antonio Kast’s government won its first major legislative battle. It won by two votes, with more than half the country opposed, and still can’t sign it into law.

Chile’s Senate approved most of President José Antonio Kast’s economic and tax overhaul on Thursday, July 16, 2026, after a twelve-hour debate that ran until nearly 3 a.m. The decisive vote, on the article setting tax stability for large investments, ended 26 in favor to 24 against.

The core of the reform gradually cuts the corporate income tax rate for large companies: from 27% to 25.5% in 2027, to 24% in 2028, and to 23% starting the 2029 tax year. The law also freezes the tax burden on the largest projects for up to two decades: ten years of stability for investments between $50 million and $100 million, fifteen years for those between $100 million and $350 million, and twenty years for those exceeding $350 million.

The package also exempts homeowners over 65 from property tax on their primary residence, creates a “financial right to be forgotten” that requires erasing prescribed or extinguished debts from credit records after five years, and reimburses expenses to companies whose projects were revoked on environmental grounds.

“Today is an important day for Chile, the country needs to grow and this project makes it possible,” Finance Minister Jorge Quiroz said after the vote. The government defends the reform as a tool to attract investment, create jobs and revive an economy that never fully recovered from the pandemic: Chile’s GDP fell 0.5% in the first quarter of 2026, and unemployment hit 9.4% between March and May, according to official figures.

The left-wing opposition called the corporate reimbursement mechanism irregular and announced it would file three challenges with Chile’s Constitutional Court, including one against the tax-stability clause. “What the right has done is hand out a tax amnesty,” said Christian Democrat Senator Yasna Provoste. Frente Amplio Senator Beatriz Sánchez put a number on it: “Every point cut means 420 million dollars less in state revenue.”

Academics cited by Infobae warned the tax-stability clause could limit future governments’ ability to change fiscal policy for decades. It marks a reversal: since 2014, successive center-left governments had pushed to raise corporate tax rates and expand the state’s redistributive role, political scientist Rodrigo Arellano of Universidad del Desarrollo told the AFP news agency.

The reform also lacks public support. According to pollster Cadem, 56% of Chileans oppose the corporate tax cut, and Kast’s disapproval rating stands at 60%. Even so, Senate approval marks the first major legislative win for the right-wing government that took office March 11, 2026, after winning December’s runoff with more than 58% of the vote across all sixteen of Chile’s regions.

The bill is not yet law. It returned to the Chamber of Deputies because of the Senate’s changes, and on Monday, August 3, the upper house was still set to vote on a mechanism to compensate municipalities for the revenue they will lose from the seniors’ property-tax exemption, a point that has divided mayors themselves. Kast won July’s battle. Whether his reform survives constitutional review and reaches the statute books intact remains an open question.