Sept. 28 (Bloomberg) –Chile's economic growth and higher revenue from copper mines will allow the government to finance a 5 percent increase in spending next year without raising taxes, Economy Minister Pablo Longueira said.
"Tax reform isn't taboo, but I think it's important for Chileans to known that all the programs in the budget legislation are already financed," Longueira said in an interview today in Santiago.
The government is raising the copper price estimate that is used to forecast public revenue to $3.02 a pound in 2012 from this year's $2.59 a pound. Economic growth of about 6.5 percent this year will provide the government with $3 billion in additional revenue, of which $1.5 billion will go to public spending, he said in a speech before the interview.
After four months of student protests in support of improved education, the government will stick to its policy of raising expenditure in line with economic growth of 5 percent next year, Longueira said. The increase in spending will be focused on education and social programs, he said.
Tax changes are "something we have to discuss parallel to the budget," Longueira said. "We need to discuss whether tax reform would be aimed at redistribution, investment promotion or expanding on ways to strengthen economic growth."
The government, which receives about one-third of its revenue from copper, doesn't need to raise taxes to meet its fiscal goals even as it increases spending on education in the $200 billion economy, he said.
President Sebastian Pinera in July promised to create a $4 billion fund for education to increase scholarships and grants. Student leaders want more and will stage marches in Santiago on Sept. 29.
Chile's government will post a fiscal surplus of 1.3 percent of gross domestic product this year and will narrow the structural deficit to 1 percent by 2014 when it leaves office from a 3 percent deficit in 2009, according to the minister. Longueira told Santiago-based newspaper El Mercurio this month that he supports raising corporate taxes from 17 percent to 20 percent to fund social programs.
"The increase in the long-term copper price makes it easier for us to reach our goals," Longueira said today. "The government will act very responsibly, especially given what's happening in the global economy, which means we will sustain macroeconomic balance and fiscal responsibility. Chileans must learn to value how responsibly the country's economy is being managed."
The government will submit its budget proposal to Congress on Sept. 29, Longueira told reporters today.
The peso strengthened for a second day, gaining 1.3 percent to 505.54 per dollar at 12:26 p.m. New York time from 512.25 yesterday.