## 1. Mining Taxes

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---

### A. Introduction and Fiscal Context
- Chile achieved average GDP growth of 3.7 percent over the last two decades, compared with Latin American and the Caribbean (LAC) average of 2.3 percent and OECD average of 1.8 percent.
- Poverty headcount fell from around 35 percent in 2000 to slightly above 10 percent in 2019; extreme poverty appears to have been virtually eliminated.
- Average tax revenue over the last decade hovered between 18 and 20 percent of GDP; in 2019 tax revenue reached 19.4 percent of GDP.
- Authorities aim to reduce the structural fiscal deficit toward broadly balanced over the medium term (from a deficit target of 2.1 percent in the 2023 Budget) and stabilize gross public debt below 45 percent of GDP.
- Government tax reform under discussion aims to gradually raise net revenues by about 3.5 percent of GDP by 2026 and is paired with comprehensive social spending plans (education, health, housing, dependent care, and pensions).

### B. Stylized Facts of Chile’s Tax System Relevant to Mining and Overall Revenue
- Total tax revenue (excludes social security contributions) includes personal and corporate income, goods and services (including VAT), property, payroll, trade, and other taxes.
- Chile’s PIT collects 1.5 percent of GDP—6.6 percentage points of GDP below the OECD average—with a high exempt threshold equivalent to 80 percent of Chile’s per capita GDP.
- CIT performance is strong at 4.9 percent of GDP—about 1.9 percentage points higher than the OECD average.
- VAT revenue is 8.3 percent of GDP (OECD average 6.9 percent of GDP).
- Property taxes generate 1.1 percent of GDP in Chile versus the OECD average of 1.8 percent of GDP.
- Excise taxes collect 1.5 percent of GDP in Chile versus the OECD average of 2.4 percent of GDP.
- The redistributive effect of the fiscal system in Chile is the lowest in the OECD, reducing the Gini coefficient by less than 5 points (3 points from transfers and 2 points from taxes).

### C. Main Elements of the Authorities’ Tax Reform Plan (June 2022)
- Goals: raise revenues for expanded social services; increase progressivity; simplify and lower compliance costs; reduce incentives for aggressive tax planning; foster a green economy.
- Key measures include:
  - Move from semi-integrated income taxation to a dual system, with a new tax on capital income.
  - Broadening of the tax net to retained profits via a tax on retained earnings for firms with a majority of revenues from passive sources.
  - More progressive PIT with additional deductions for rental and dependent-care expenses.
  - Introduction of a new wealth tax.
  - Lower CIT rate from 27 to 25 percent conditional on comparable spending on productivity-boosting investments.
  - Tax administration measures: new anti-avoidance rule, fiscal whistleblower program, more relaxed banking-secret restrictions vis-à-vis the tax authority, and more stringent transfer pricing regulations.
  - Modifications to mining taxes, including introduction of a moderate ad-valorem royalty and higher rates of the current special mining tax.

### D. Estimated Revenue Yields from Proposed Tax Changes (In percent of GDP)
- Yearly and cumulative estimates (Sources: Ministry of Finance and IMF staff estimates):
  - Income taxes: 2023 = 0.2; 2024 = 0.6; 2025 = 0.7; 2026 = 0.8
  - Wealth: 2023 = 0.0; 2024 = 0.3; 2025 = 0.4; 2026 = 0.4
  - Reduction of exemptions: 2023 = 0.0; 2024 = 0.0; 2025 = 0.0; 2026 = 0.2
  - Tax administration: 2023 = 0.4; 2024 = 0.8; 2025 = 1.2; 2026 = 1.6
  - Royalty: 2023 = 0.0; 2024 = 0.1; 2025 = 0.5; 2026 = 0.5
  - Corrective taxes: 2023 = 0.0; 2024 = 0.0; 2025 = 0.1; 2026 = 0.3
  - Total increase in revenues: 2023 = 0.6; 2024 = 1.8; 2025 = 3.0; 2026 = 3.8
  - Tax expenditures (impact): 2023 = 0.0; 2024 = -0.4; 2025 = -0.3; 2026 = -0.3
  - Net increase in revenues: 2023 = 0.6; 2024 = 1.4; 2025 = 2.7; 2026 = 3.5
  - Differences with original proposal: 2023 = 0.0; 2024 = -0.5; 2025 = -0.5; 2026 = -0.6

### E. Benchmarking the Direct Tax Component in International Perspective
- Methodology highlights:
  - Uses tax-to-GDP data for OECD countries from the WORLD database for 2000–2019.
  - Identifies four-year continuous windows (“episodes”) where tax-to-GDP ratio grew on average by the same amount as Chile’s reform (for comparable tax combinations).
  - Attributes calculated per episode: duration (consecutive years of increase), yield (accumulated increase), sustainability (tax-to-GDP ratio does not return to initial or lower level in the four-year window after the episode).
  - Direct-tax component for Chile includes PIT, CIT, and wealth taxes (comparison group uses PIT, CIT, and property taxes); exercise done with and without tax administration measures.
  - Direct tax component assumed yield in year four: 2.7 percent of GDP (0.68 per year on average) with tax administration measures; 1.1 percent of GDP (0.28 per year on average) without those measures.

- Excluding tax administration measures:
  - 48 similar OECD episodes identified where direct-tax-to-GDP ratio increased by 0.28 percentage points on average per year over a four-year period.
  - In most episodes, direct tax revenues increased between 1 and 2 percent of GDP over 3 to 5 years; about 15 percent of cases saw increases larger than 3.5 percent.
  - Average duration: 4.2 years; average yield: 2.2 percent of GDP.
  - Considering only sustainable episodes: 30 episodes remain; average duration 3.8 years; average yield similar to full sample.
  - Including 1990s data adds 28 episodes (all but one sustainable); average duration 3.9 years; average yield 2.7 percent of GDP.

- Including tax administration measures:
  - 9 OECD episodes identified with direct-taxes-to-GDP ratio increases of at least 2.7 percentage points over four years.
  - Most durations between 4 and 5 years; yields concentrated between 3.5 and 4 percent of GDP.
  - Average yield: 3.6 percent of GDP; average duration: 4 years.
  - Sustainable episodes: 6 episodes remain; average duration 3.7 years; average yield 3.8 percent of GDP.
  - Adding 1990s data reduces additional similar episodes to 8 (all sustainable); average duration 3.9 years; average yield 4.3 percent of GDP.

### F. Implications for Fiscal Consolidation and Social Spending
- The reform’s projected net revenue increase of 3.5 percent of GDP by 2026 (including tax administration measures) positions Chile within the range of historic OECD revenue mobilization episodes when comparable administration measures are implemented.
- Without tax administration measures, the direct tax yield is smaller (1.1 percent of GDP by year four), and similar increases have been relatively common but less likely to be sustained in all cases.
- Mining tax changes specified (moderate ad-valorem royalty and higher special mining tax rates) are part of revenue mix but mining revenue dynamics may require project-level assessment given limited direct relationship to GDP.

### Tax administration capacity and expected yields
- Recent IMF research (Chang and others, 2020 and 2022) finds that stronger tax operational capacity is associated with significantly more tax revenues.
- Tax administration characteristics that increase revenue include:
  - compliance risks management
  - use of third-party data
  - public accountability and transparency
  - presence of a Large Taxpayer's Office
  - timely filing of tax declarations
  - support for voluntary compliance
- Akitoby and others (2018) suggest:
  - (i) multi-pronged tax administration reforms often go hand in hand with tax policy measures; and
  - (ii) sustaining revenue gains hinges on efforts in key compliance areas (risk-based audits, registration, filing, payment, and reporting).
- IMF Technical Assistance experience suggests it is rare to see yields of over 0.5 percent of GDP from tax administration measures.

### Downward risks to revenue potential
- Wealth taxes: international experience shows wealth taxes have been difficult to implement and have traditionally underperformed in revenue potential.
- Property taxation: an alternative is increasing property taxation, including ensuring property values are properly assessed and frequently updated.
- Corporate income tax (CIT) incentives: the reform proposal allows companies to credit up to two percentage points of CIT with productive investments. Revenue estimates assume firms will use only half of the credit, but firms may try to use as much as possible. These incentives should be regularly assessed and, if cost-ineffective, phased out.

### Medium-term tax policy options with revenue implications
- Green taxes: a forthcoming pillar on green taxes has strong potential to increase revenues and support climate goals; revenue collection of up to 2 percent of GDP by 2030 could be recycled for targeted transfers and investment.
- Personal income tax (PIT): gradually lowering the exempt threshold could significantly increase coverage while still protecting poorer households.
- Mining taxes: discussions are ongoing to modify mining taxes; mining taxes are a significant source of income (see Box 1 on mining taxes).

### Authorities’ medium-term fiscal consolidation plan
- The government aims to achieve a broadly balanced structural fiscal position and keep public debt below 45 percent of GDP over the medium term.
- This entails a structural fiscal consolidation effort of around 2.1 percent of GDP from the 2023 structural Budget target.
- Note: The consolidation effort on the basis of the headline fiscal balance is closer to 3 percent of GDP.
- Cyclically adjusted Fiscal Balance (In percent of GDP): 2023: -2.1; 2024: -1.8; 2025: -1.1; 2026: 0.3; 2027: 0.0.

### Mining taxes (Box 1) — key points
- IMF Technical Assistance assessed Chile’s government take in mining is in the middle to lower half of the distribution across countries.
- Low break-even price contributes to a competitive investment climate; government take increases with profitability.
- New proposal (announced end of October) includes:
  - an ad-valorem royalty with a flat structure at a moderate rate of 1 percent;
  - the profits-based component (Impuesto Específico a la Minería) maintains current structure with higher marginal tax rates as operating margin increases (progressive element attractive to investors).

### Tax reform, PGU, and fiscal space
- The tax reform aims to finance additional social spending; universal minimum pension (PGU) approved in March 2022 entails additional net spending of about 0.8 percent of GDP per year.
- The expansion proposed in the draft pension reform would cost an estimated extra 0.44 percent of GDP.
- Assuming the total tax reform yields the authorities' projected revenue increase, the increase in fiscal space would be around 1.4 percent of GDP (sufficient to finance the proposed expansion of the PGU).
- Under a more conservative yield from tax administration measures, fiscal space increases to 1.0 percent of GDP.
- If tax administration yields are 0.4 percent of GDP (as reported by IMF Technical Assistance), additional expenditure rationalization or revenue mobilization would be required to achieve full fiscal consolidation and finance the PGU expansion.

### Revenue and fiscal consolidation scenarios (In percent of GDP)
- Structural fiscal consolidation effort in authorities’ medium-term plan: 2.1 (applies to all scenarios).

- Authorities' tax reform scenario (1):
  - Revenues: 3.5
  - Of which:
    - Direct taxes: 1.1
    - Tax administration: 1.6
    - Royalty: 0.5
    - Corrective taxes: 0.3
  - Additional spending consistent with fiscal consolidation: 1.4
    - PGU approved in March: 0.8
    - PGU proposed expansion: 0.44
  - Net effect of all tax measures and expansion of PGU: 0.16

- Conservative tax administration yield (2):
  - Revenues: 3.1
  - Of which:
    - Direct taxes: 1.1
    - Tax administration: 1.1
    - Royalty: 0.5
    - Corrective taxes: 0.3
  - Additional spending consistent with fiscal consolidation: 1.0
    - PGU approved in March: 0.8
    - PGU proposed expansion: 0.44
  - Net effect of all tax measures and expansion of PGU: -0.24

- Realistic tax administration yield (3):
  - Revenues: 2.5
  - Of which:
    - Direct taxes: 1.1
    - Tax administration: 0.5
    - Royalty: 0.5
    - Corrective taxes: 0.3
  - Additional spending consistent with fiscal consolidation: 0.4
    - PGU approved in March: 0.8
    - PGU proposed expansion: 0.44
  - Net effect of all tax measures and expansion of PGU: -0.84

### Growth, distribution, and spending composition considerations
- Empirical evidence:
  - CIT and PIT are relatively more harmful for growth than consumption and property taxes.
  - Acosta and Yoo (2012) and De Mooij and others (2020) find that raising taxes on income, while reducing consumption and property taxes and keeping the overall tax burden unchanged, is negatively associated with growth.
  - Income taxes tend to reduce inequality more than consumption taxes (trade-off between growth and equity).
  - Public spending in R&D and education can boost investment and innovation, leading to higher growth.
  - Martínez and others (2017) find social spending on basic and secondary education and health leads to lower inequality and poverty in Chile.
  - Candia and Engel (2018) find transfers in education (especially primary and secondary) and in health reduce inequality.
- The Ministry of Finance estimates the tax and spending reform could increase GDP per capita by 1.8 percent over the medium term, with a negative effect of 2.7 percent from higher taxes and a positive effect of 4.5 percent from additional social and other spending.

### Conclusions and policy recommendations
- The tax reform is needed to finance fiscal consolidation and increase social spending, but expected revenue yields are highly uncertain.
- Benchmarking suggests increasing revenues by 2.7 percent of GDP over four years from direct taxes (PIT, CIT, and property taxes) is feasible but rare; the target for direct taxes without including gains from tax administration seems feasible based on many OECD episodes.
- Including tax administration effects significantly reduces comparable international episodes; IMF Technical Assistance experience suggests tax administration reforms only occasionally yield more than 0.5 percent of GDP.
- Wealth taxes often underperform and have been scaled down or eliminated in some countries; tax expenditures may materialize with high probability and should be regularly analyzed for cost-effectiveness.
- Sequencing social spending reforms conditional on revenue performance is key to maintaining fiscal sustainability while boosting inclusive growth.
- Under a realistic tax administration yield scenario, additional revenue or spending measures would be needed to meet fiscal consolidation goals and finance the expansion of the PGU.
- Future reform efforts could focus on:
  - gradually increasing the carbon tax and the excise tax on diesel;
  - lowering the exempt threshold of the PIT to bring more taxpayers into the tax net;
  - increasing the efficiency of property taxes by ensuring fiscal valuation accurately reflects property values.

*Source: Chile — Tax Reform Scenarios in International Perspective (December 16, 2022), IMF staff report content provided.*

### 1. Mining Taxes _______________________________________________________________________ 13

### 1. Mining Taxes

### A. Introduction and Fiscal Context
- Chile achieved average GDP growth of 3.7 percent over the last two decades, compared with Latin American and the Caribbean (LAC) average of 2.3 percent and OECD average of 1.8 percent.
- Poverty headcount fell from around 35 percent in 2000 to slightly above 10 percent in 2019; extreme poverty appears to have been virtually eliminated.
- Average tax revenue over the last decade hovered between 18 and 20 percent of GDP; in 2019 tax revenue reached 19.4 percent of GDP.
- Authorities aim to reduce the structural fiscal deficit toward broadly balanced over the medium term (from a deficit target of 2.1 percent in the 2023 Budget) and stabilize gross public debt below 45 percent of GDP.
- Government tax reform under discussion aims to gradually raise net revenues by about 3.5 percent of GDP by 2026 and is paired with comprehensive social spending plans (education, health, housing, dependent care, and pensions).

### B. Stylized Facts of Chile’s Tax System Relevant to Mining and Overall Revenue
- Total tax revenue (excludes social security contributions) includes personal and corporate income, goods and services (including VAT), property, payroll, trade, and other taxes.
- Chile’s PIT collects 1.5 percent of GDP—6.6 percentage points of GDP below the OECD average—with a high exempt threshold equivalent to 80 percent of Chile’s per capita GDP.
- CIT performance is strong at 4.9 percent of GDP—about 1.9 percentage points higher than the OECD average.
- VAT revenue is 8.3 percent of GDP (OECD average 6.9 percent of GDP).
- Property taxes generate 1.1 percent of GDP in Chile versus the OECD average of 1.8 percent of GDP.
- Excise taxes collect 1.5 percent of GDP in Chile versus the OECD average of 2.4 percent of GDP.
- The redistributive effect of the fiscal system in Chile is the lowest in the OECD, reducing the Gini coefficient by less than 5 points (3 points from transfers and 2 points from taxes).

### C. Main Elements of the Authorities’ Tax Reform Plan (June 2022)
- Goals: raise revenues for expanded social services; increase progressivity; simplify and lower compliance costs; reduce incentives for aggressive tax planning; foster a green economy.
- Key measures include:
  - Move from semi-integrated income taxation to a dual system, with a new tax on capital income.
  - Broadening of the tax net to retained profits via a tax on retained earnings for firms with a majority of revenues from passive sources.
  - More progressive PIT with additional deductions for rental and dependent-care expenses.
  - Introduction of a new wealth tax.
  - Lower CIT rate from 27 to 25 percent conditional on comparable spending on productivity-boosting investments.
  - Tax administration measures: new anti-avoidance rule, fiscal whistleblower program, more relaxed banking-secret restrictions vis-à-vis the tax authority, and more stringent transfer pricing regulations.
  - Modifications to mining taxes, including introduction of a moderate ad-valorem royalty and higher rates of the current special mining tax.

### D. Estimated Revenue Yields from Proposed Tax Changes (In percent of GDP)
- Yearly and cumulative estimates (Sources: Ministry of Finance and IMF staff estimates):
  - Income taxes: 2023 = 0.2; 2024 = 0.6; 2025 = 0.7; 2026 = 0.8
  - Wealth: 2023 = 0.0; 2024 = 0.3; 2025 = 0.4; 2026 = 0.4
  - Reduction of exemptions: 2023 = 0.0; 2024 = 0.0; 2025 = 0.0; 2026 = 0.2
  - Tax administration: 2023 = 0.4; 2024 = 0.8; 2025 = 1.2; 2026 = 1.6
  - Royalty: 2023 = 0.0; 2024 = 0.1; 2025 = 0.5; 2026 = 0.5
  - Corrective taxes: 2023 = 0.0; 2024 = 0.0; 2025 = 0.1; 2026 = 0.3
  - Total increase in revenues: 2023 = 0.6; 2024 = 1.8; 2025 = 3.0; 2026 = 3.8
  - Tax expenditures (impact): 2023 = 0.0; 2024 = -0.4; 2025 = -0.3; 2026 = -0.3
  - Net increase in revenues: 2023 = 0.6; 2024 = 1.4; 2025 = 2.7; 2026 = 3.5
  - Differences with original proposal: 2023 = 0.0; 2024 = -0.5; 2025 = -0.5; 2026 = -0.6

### E. Benchmarking the Direct Tax Component in International Perspective
- Methodology highlights:
  - Uses tax-to-GDP data for OECD countries from the WORLD database for 2000–2019.
  - Identifies four-year continuous windows (“episodes”) where tax-to-GDP ratio grew on average by the same amount as Chile’s reform (for comparable tax combinations).
  - Attributes calculated per episode: duration (consecutive years of increase), yield (accumulated increase), sustainability (tax-to-GDP ratio does not return to initial or lower level in the four-year window after the episode).
  - Direct-tax component for Chile includes PIT, CIT, and wealth taxes (comparison group uses PIT, CIT, and property taxes); exercise done with and without tax administration measures.
  - Direct tax component assumed yield in year four: 2.7 percent of GDP (0.68 per year on average) with tax administration measures; 1.1 percent of GDP (0.28 per year on average) without those measures.

- Excluding tax administration measures:
  - 48 similar OECD episodes identified where direct-tax-to-GDP ratio increased by 0.28 percentage points on average per year over a four-year period.
  - In most episodes, direct tax revenues increased between 1 and 2 percent of GDP over 3 to 5 years; about 15 percent of cases saw increases larger than 3.5 percent.
  - Average duration: 4.2 years; average yield: 2.2 percent of GDP.
  - Considering only sustainable episodes: 30 episodes remain; average duration 3.8 years; average yield similar to full sample.
  - Including 1990s data adds 28 episodes (all but one sustainable); average duration 3.9 years; average yield 2.7 percent of GDP.

- Including tax administration measures:
  - 9 OECD episodes identified with direct-taxes-to-GDP ratio increases of at least 2.7 percentage points over four years.
  - Most durations between 4 and 5 years; yields concentrated between 3.5 and 4 percent of GDP.
  - Average yield: 3.6 percent of GDP; average duration: 4 years.
  - Sustainable episodes: 6 episodes remain; average duration 3.7 years; average yield 3.8 percent of GDP.
  - Adding 1990s data reduces additional similar episodes to 8 (all sustainable); average duration 3.9 years; average yield 4.3 percent of GDP.

### F. Implications for Fiscal Consolidation and Social Spending
- The reform’s projected net revenue increase of 3.5 percent of GDP by 2026 (including tax administration measures) positions Chile within the range of historic OECD revenue mobilization episodes when comparable administration measures are implemented.
- Without tax administration measures, the direct tax yield is smaller (1.1 percent of GDP by year four), and similar increases have been relatively common but less likely to be sustained in all cases.
- Mining tax changes specified (moderate ad-valorem royalty and higher special mining tax rates) are part of revenue mix but mining revenue dynamics may require project-level assessment given limited direct relationship to GDP.

*Source: Chile — Tax Reform Scenarios in International Perspective (December 16, 2022), IMF staff report content provided.*

### 20.      Measuring the yields of tax administration measures is particularly difficult. The

### 20.      Measuring the yields of tax administration measures is particularly difficult.

### Tax administration capacity and expected yields
- Recent IMF research (Chang and others, 2020 and 2022) finds that stronger tax operational capacity is associated with significantly more tax revenues.
- Tax administration characteristics that increase revenue include:
  - compliance risks management
  - use of third-party data
  - public accountability and transparency
  - presence of a Large Taxpayer's Office
  - timely filing of tax declarations
  - support for voluntary compliance
- Akitoby and others (2018) suggest:
  - (i) multi-pronged tax administration reforms often go hand in hand with tax policy measures; and
  - (ii) sustaining revenue gains hinges on efforts in key compliance areas (risk-based audits, registration, filing, payment, and reporting).
- IMF Technical Assistance experience suggests it is rare to see yields of over 0.5 percent of GDP from tax administration measures.

### Downward risks to revenue potential
- Wealth taxes: international experience shows wealth taxes have been difficult to implement and have traditionally underperformed in revenue potential.
- Property taxation: an alternative is increasing property taxation, including ensuring property values are properly assessed and frequently updated.
- Corporate income tax (CIT) incentives: the reform proposal allows companies to credit up to two percentage points of CIT with productive investments. Revenue estimates assume firms will use only half of the credit, but firms may try to use as much as possible. These incentives should be regularly assessed and, if cost-ineffective, phased out.

### Medium-term tax policy options with revenue implications
- Green taxes: a forthcoming pillar on green taxes has strong potential to increase revenues and support climate goals; revenue collection of up to 2 percent of GDP by 2030 could be recycled for targeted transfers and investment.
- Personal income tax (PIT): gradually lowering the exempt threshold could significantly increase coverage while still protecting poorer households.
- Mining taxes: discussions are ongoing to modify mining taxes; mining taxes are a significant source of income (see Box 1 on mining taxes).

### Authorities’ medium-term fiscal consolidation plan
- The government aims to achieve a broadly balanced structural fiscal position and keep public debt below 45 percent of GDP over the medium term.
- This entails a structural fiscal consolidation effort of around 2.1 percent of GDP from the 2023 structural Budget target.
- Note: The consolidation effort on the basis of the headline fiscal balance is closer to 3 percent of GDP.
- Cyclically adjusted Fiscal Balance (In percent of GDP): 2023: -2.1; 2024: -1.8; 2025: -1.1; 2026: 0.3; 2027: 0.0.

### Mining taxes (Box 1) — key points
- IMF Technical Assistance assessed Chile’s government take in mining is in the middle to lower half of the distribution across countries.
- Low break-even price contributes to a competitive investment climate; government take increases with profitability.
- New proposal (announced end of October) includes:
  - an ad-valorem royalty with a flat structure at a moderate rate of 1 percent;
  - the profits-based component (Impuesto Específico a la Minería) maintains current structure with higher marginal tax rates as operating margin increases (progressive element attractive to investors).

### Tax reform, PGU, and fiscal space
- The tax reform aims to finance additional social spending; universal minimum pension (PGU) approved in March 2022 entails additional net spending of about 0.8 percent of GDP per year.
- The expansion proposed in the draft pension reform would cost an estimated extra 0.44 percent of GDP.
- Assuming the total tax reform yields the authorities' projected revenue increase, the increase in fiscal space would be around 1.4 percent of GDP (sufficient to finance the proposed expansion of the PGU).
- Under a more conservative yield from tax administration measures, fiscal space increases to 1.0 percent of GDP.
- If tax administration yields are 0.4 percent of GDP (as reported by IMF Technical Assistance), additional expenditure rationalization or revenue mobilization would be required to achieve full fiscal consolidation and finance the PGU expansion.

### Revenue and fiscal consolidation scenarios (In percent of GDP)
- Structural fiscal consolidation effort in authorities’ medium-term plan: 2.1 (applies to all scenarios).
- Authorities' tax reform scenario (1):
  - Revenues: 3.5
  - Of which:
    - Direct taxes: 1.1
    - Tax administration: 1.6
    - Royalty: 0.5
    - Corrective taxes: 0.3
  - Additional spending consistent with fiscal consolidation: 1.4
    - PGU approved in March: 0.8
    - PGU proposed expansion: 0.44
  - Net effect of all tax measures and expansion of PGU: 0.16
- Conservative tax administration yield (2):
  - Revenues: 3.1
  - Of which:
    - Direct taxes: 1.1
    - Tax administration: 1.1
    - Royalty: 0.5
    - Corrective taxes: 0.3
  - Additional spending consistent with fiscal consolidation: 1.0
    - PGU approved in March: 0.8
    - PGU proposed expansion: 0.44
  - Net effect of all tax measures and expansion of PGU: -0.24
- Realistic tax administration yield (3):
  - Revenues: 2.5
  - Of which:
    - Direct taxes: 1.1
    - Tax administration: 0.5
    - Royalty: 0.5
    - Corrective taxes: 0.3
  - Additional spending consistent with fiscal consolidation: 0.4
    - PGU approved in March: 0.8
    - PGU proposed expansion: 0.44
  - Net effect of all tax measures and expansion of PGU: -0.84

### Growth, distribution, and spending composition considerations
- Empirical evidence:
  - CIT and PIT are relatively more harmful for growth than consumption and property taxes.
  - Acosta and Yoo (2012) and De Mooij and others (2020) find that raising taxes on income, while reducing consumption and property taxes and keeping the overall tax burden unchanged, is negatively associated with growth.
  - Income taxes tend to reduce inequality more than consumption taxes (trade-off between growth and equity).
  - Public spending in R&D and education can boost investment and innovation, leading to higher growth.
  - Martínez and others (2017) find social spending on basic and secondary education and health leads to lower inequality and poverty in Chile.
  - Candia and Engel (2018) find transfers in education (especially primary and secondary) and in health reduce inequality.
- The Ministry of Finance estimates the tax and spending reform could increase GDP per capita by 1.8 percent over the medium term, with a negative effect of 2.7 percent from higher taxes and a positive effect of 4.5 percent from additional social and other spending.

### Conclusions and policy recommendations
- The tax reform is needed to finance fiscal consolidation and increase social spending, but expected revenue yields are highly uncertain.
- Benchmarking suggests increasing revenues by 2.7 percent of GDP over four years from direct taxes (PIT, CIT, and property taxes) is feasible but rare; the target for direct taxes without including gains from tax administration seems feasible based on many OECD episodes.
- Including tax administration effects significantly reduces comparable international episodes; IMF Technical Assistance experience suggests tax administration reforms only occasionally yield more than 0.5 percent of GDP.
- Wealth taxes often underperform and have been scaled down or eliminated in some countries; tax expenditures may materialize with high probability and should be regularly analyzed for cost-effectiveness.
- Sequencing social spending reforms conditional on revenue performance is key to maintaining fiscal sustainability while boosting inclusive growth.
- Under a realistic tax administration yield scenario, additional revenue or spending measures would be needed to meet fiscal consolidation goals and finance the expansion of the PGU.
- Future reform efforts could focus on:
  - gradually increasing the carbon tax and the excise tax on diesel;
  - lowering the exempt threshold of the PIT to bring more taxpayers into the tax net;
  - increasing the efficiency of property taxes by ensuring fiscal valuation accurately reflects property values.

*Source: IMF staff analysis in the chapter "Measuring the yields of tax administration measures is particularly difficult."*

### 7.      Pension funds are deemed to have played a key role in the development of capital

### 1chlea2023003 - 7.      Pension funds are deemed to have played a key role in the development of capital markets

### Role and historical evolution of AFPs
- The establishment of AFPs in Chile is associated with a remarkable increase in aggregate savings.
- AFPs contributed to lower financing costs, provided a stable source of funding for long-term investment, and acted as shock absorbers in several episodes of capital outflows.
- AFPs remain key players, unparalleled in size when compared to other domestic investors or other countries.

### Investment strategy of pension funds versus other investors
- Progressive relaxation of AFP investment rules since 1981 increased availability of inexpensive long-term financing.
  - Initially allowed only fixed-income instruments.
  - 1985: equities allowed up to 30 percent of assets.
  - 1989 and 1990: broadened to include all types of publicly traded shares, mutual funds (MFs), and foreign fixed-income instruments.
  - 1990s: gradual relaxation of investment limits abroad.
  - 2002 reform: introduced five different types of funds, A through E, with varying exposure to variable-income assets.
  - 2008: limits for AFPs to invest abroad relaxed further and authorized investments in derivative instruments.
- AFPs are main providers of liquidity for long-term sovereign bonds, bank bonds, corporate bonds, and stocks; they are by far the major domestic holders of local equities.
- Comparative asset composition:
  - AFPs hold about 50 percent of their portfolio in equities, more than double the share of equities held by MFs.
  - MFs hold larger shares of corporate and bank bonds compared to AFPs.
  - AFP investment concentrated in natural resources, services, and electricity.
- Time-horizon and liquidity:
  - AFPs favor long-term instruments and tend to buy-and-hold.
  - Average maturity of assets held by AFPs is longer than those held by MFs across all asset classes, particularly for sovereign bonds.
  - Banks typically invest more short-term due to regulatory liquidity requirements.
  - AFPs provide less short-term liquidity to capital markets because of buy-and-hold strategies.

### Impact of pension withdrawals on pension funds and household balance sheets
- Scale and timing of withdrawals:
  - Three rounds of withdrawals approved in June 2020, December 2020, and April 2021.
  - Withdrawals amounted to more than US$48 billion from pension funds, equivalent to 23 percent of 2020 total assets or nearly 20 percent of 2020 GDP.
- Asset composition effects:
  - Most of the reduction in assets occurred in debt securities and currency and deposits.
  - At the time of the withdrawals, AFPs were highly liquid amid high uncertainty and excessive fund switching.
  - The BCCh introduced liquidity facilities that allowed more orderly asset liquidation.
  - AFPs reduced their domestic exposure, both in USD and as a share of total investment, mostly driven by a reduction in domestic deposits.
- Household balance sheet dynamics (percent of GDP):
  - Outstanding financial assets: 2020Q1 = 188.2; 2021Q3 = 178.8; 2022Q2 = 167.9
  - Currency and deposits: 2020Q1 = 24.7; 2021Q3 = 36.5; 2022Q2 = 31.9
  - Shares and other equity: 2020Q1 = 64.4; 2021Q3 = 58.6; 2022Q2 = 56.1
  - Pension funds: 2020Q1 = 76.8; 2021Q3 = 63.4; 2022Q2 = 59.5
  - Life insurance entitlements: 2020Q1 = 20.8; 2021Q3 = 18.6; 2022Q2 = 18.5
  - Outstanding liabilities: 2020Q1 = 51.4; 2021Q3 = 47.3; 2022Q2 = 47.5
  - Net financial assets: 2020Q1 = 136.8; 2021Q3 = 131.5; 2022Q2 = 120.4
  - Gross disposable income: 2020Q1 = 15.5; 2021Q3 = 17.8; 2022Q2 = 14.6
- Consumption and savings behavior:
  - Households displayed a high propensity to consume out of pension withdrawals.
  - Currency and deposits increased significantly between 2020Q1 and 2021Q3.
  - Average saving rate decreased significantly in the second half of 2020, corresponding to the first two withdrawals.
  - Total saving rate declined; saving rate turned negative in 2022Q3 as households continued to reduce deposit balances.
  - Households used part of withdrawals to repay loans and replenish cash deposits; credit card past-due loans decreased below pre-pandemic levels and NPLs reached historical lows.

### Effects on government, corporate financing, and equity markets
- Availability and cost of long-term financing:
  - AFPs’ liquidation reduced availability of long-term financing for government and corporate sectors.
  - In 2021, the share of external sovereign debt reached 35 percent as the government resorted more to external debt.
  - These factors impacted financing costs for the government and corporates.
- Equity market impacts and heterogeneity:
  - Stock prices increased and the stock market rallied since the second half of 2020 due to expected consumption boost and withdrawals.
  - Companies held by pension funds performed worse than companies not held by pension funds, suggesting increased cost of capital and reduced liquidity for those companies relative to the rest of the market.
  - The negative impact appeared proportional to exposure: companies with more exposure experienced larger declines.
- Banks:
  - Impact on banks’ stocks seemed muted despite pension funds liquidating bank stocks and bonds.
  - Banks received increased funding via increased deposits; BCCh provided extraordinary liquidity facilities.
  - Banks shifted liabilities toward more short-term funding, cut long-term lending, and started lending more at variable rates.
- Shock-absorber role weakened:
  - Pension funds act as shock absorbers in response to exchange rate movements by rebalancing portfolios.
  - The decline in pension fund assets due to withdrawals weakened their performance as natural shock absorbers.

### Empirical approach to stock market impact
- Identification strategy summary:
  - Staff estimated a panel regression of stock prices on indicators including company-specific exposures to pension funds.
  - Sample: daily returns for all companies listed in the Santiago Stock Exchange between 2018 and 2022.
  - Abnormal returns estimated assuming a firm-specific beta coefficient and a common elasticity of returns to pension fund exposure.
- Regression specification (as presented):
  - r_{i,t} = β_{i,t} r_{t} + γ PF_{i,t−31} + δ_{t} + η_{t} PF_{i,t−31} + e_{it}
    - r_{i,t} are daily returns for company i, and r_{t} are average daily returns for the Santiago Stock Exchange;
    - PF_{i,t−31} measures the exposure of company i to pension funds as the share of stocks held on pension fund portfolios the month earlier;
    - δ_{t} are daily fixed effects in a 30-day window around the approval of the three pension withdrawals;
    - η_{t} are daily fixed effects interacted with the exposure to pension funds;
    - e_{it} is an error term.
- Identification caveats:
  - Analysis captures relative impact on most affected companies versus rest of market rather than general equilibrium effects.
  - Withdrawals were publicly discussed before approval, complicating precise timing.
  - Strategy relies on assumption that exposed and non-exposed companies shared similar features and were affected similarly by other policies and shocks, differing only in pension fund exposure.

### Policy recommendations and avenues to deepen capital markets
- Avoid further pension withdrawals:
  - More withdrawals would further weaken the pension system, raise fiscal costs, and undermine domestic capital market depth and shock-absorption capacity.
  - Further withdrawals would pose a systemic liquidity risk given uncertainty and fewer buyers for long-term assets.
- Priority objective: improve pension outcomes:
  - Pension reform should focus on better pensions and redistribution goals.
  - Despite the universal basic pension reducing old-age poverty risks, addressing low contribution rate, weak contribution density, and a retirement age not aligned with life expectancy remains critical.
- Pension reform should consider capital market and macro implications:
  - Aim to rapidly replenish savings and foster sound investment.
  - International experience: individual capitalization accounts provide stronger incentives to save than notional accounts or pay-as-you-go systems, and are less likely to result in fiscal imbalances.
  - Sound investment rules, adequate regulation on risk and asset management, and a level playing field among investment managers are key to efficient allocation and avoiding excessive risk taking.
- Scope to improve pension supervision and investment options:
  - Enhance risk-based supervision model of the pension supervisor, streamlining compliance-based oversight so focus can be on riskiest entities and activities.
- Other avenues to support capital market development:
  - Establish a repo market to set appropriate risk/reward and regulatory incentives, alleviating BCCh's burden to backstop banks' liquidity needs and supporting efficient capital allocation; repo pricing information is crucial for a primary dealer system and market liquidity.
  - Establish a Primary Dealers System for sovereign bonds to fill liquidity gaps, enhance transparency, and increase financial resilience; would require government guarantee of bond availability, an electronic platform, and clear transparency principles.
  - Foster internationalization of the Chilean peso by streamlining administrative processes and removing obstacles for foreign investors to expedite broader use of the peso, attract investors, promote operations in Chile, and mitigate exchange rate risk for bond issuers.
  - Support equity market depth and liquidity: low IPO numbers reflect high reliance on bank lending, high cost of equity from illiquidity and ownership concentration; incorporate flexibility and proportionality in legal framework to attract smaller, growing firms; consider relaxing some investment restrictions on institutional investors, especially pension funds, while safeguarding consumer protection and financial stability; promote venture investment, crowdfunding, or minibonds to attract retail and other investors.
  - Promote financial inclusion via fintech: the recently approved Fintech Law established the legal framework for FinTech companies in Chile; as implemented, fintech competition can enhance market efficiency and attract capital.

### Conclusion
- Pension funds are unique players in Chilean capital markets, providing liquidity to sectors where other players are less likely to invest.
- Pension fund investment strategies have translated into large investment shares in key markets, notably long-term financing and the corporate sector.
- Pension withdrawals reduced pension benefits, lowered savings, and hurt the depth and liquidity of the domestic capital market.
- Withdrawals resulted in lower pensions and higher fiscal costs, heightening the urgency of pension reform; they also led to a fast recovery from the pandemic via consumption but worsened the external position, increased inflationary pressures, and reduced availability of long-term finance.

*Source: IMF staff report chapter text from the provided PDF content.*

### 32.      An active agenda should seek to further deepen capital markets. Pension reform should

### 1chlea2023003 - 32.      An active agenda should seek to further deepen capital markets. Pension reform should

### Capital markets and pension reform
- Pension reform should focus first and foremost on improving pension outcomes.
- When considering alternatives, pension reform should be mindful of:
  - capital market implications;
  - macroeconomic implications, including the timely need to replenish savings and channel resources to productive investment.
- Other avenues for deepening capital markets, complementing the role of pension funds, should also be considered.

### Chile’s climate strategy — overview and commitments
- Chile has a comprehensive and ambitious climate strategy, with commitments including:
  - updating in 2020 its Nationally Determined Contribution (NDC) target to reduce carbon dioxide (CO2) emissions by up to 45 percent by 2030 from 2016 levels;
  - reach carbon neutrality before 2050;
  - November 2022 update at COP27: expanding ecosystem protection by 2030 and committing to revert the growing trend of methane emission by 2025.
- Chile introduced a US$5 tax per ton of CO2 in 2014, implemented starting in 2017.
- Chile became the first country in the region to issue green bonds in 2019 and announced decommissioning of coal-fired power plants by 2040.
- Chile approved the Framework Law on Climate Change in June 2022 and started work on a Green Taxonomy to help private investment in mitigation and adaptation projects.
- Chile aims to become the lowest-cost green hydrogen producer by 2030 and one of the largest exporters by 2040.

### Rationale for a higher carbon price
- A higher carbon price would:
  - help reduce emissions;
  - green the energy sector;
  - accrue revenue for the fiscal sector.
- If revenue from a higher carbon price is prudently recycled, it can be progressive, benefitting the poorest, and positively add to GDP growth in the long term.
- Acting now and gradually increasing the carbon price over several years would dampen potential economic costs and transition risks.
- Increase in carbon price should be balanced with current elevated global fuel prices; as fuel prices fall, Chile can use the opportunity to raise its carbon tax and excise duty on diesel.
- Indirect effects (e.g., rise in price of nonfuel goods) that impact the poorest could be offset through higher spending on health, education, infrastructure, and targeted transfers, financed from higher carbon price revenue.

### Chile’s emissions profile and mitigation context
- Chile is a relatively low emitter among OECD countries but is the largest Latin America emitter in the OECD.
- Chile’s energy sector accounts for three-quarters of total emissions; electricity generation and transport are the two largest shares.
- Coal and diesel are the two fuels emitting the most (coal for electricity generation in power plants and diesel for transport).
- Land use, land-use change, and forestry (LULUCF) absorbed, on average, around two-thirds of total emissions over the last 20 years; LULUCF is currently the only sector acting as a carbon sink.
- Chile ranks within the bottom third on readiness to climate change according to the ND-GAIN index.
- Chile suffers exposure to droughts, wildfires, floods, and sea level rise; a drought starting in 2010 has generated a water crisis.

### Institutional and policy developments
- Historical institutional steps:
  - ratified UNFCCC in 1994; National Advisory Committee on the Global Climate established in 1996;
  - Ministry of the Environment established in 2010, replacing CONAMA’s role.
- Policy targets and legal framework:
  - committed to carbon neutrality by 2050;
  - pledged to keep GHG emissions below 95 MtCO2e by 2030, define 2025 as the deadline for peak emissions, and maintain GHG emissions budget below 1,100 MtCO2e for 2020-30 (updated NDC of 2020);
  - Climate Change Framework Law (Law 21.455) published in June 2022, assigns climate change action to multiple governmental entities and outlines a system that could establish GHG emission limits for regulated entities.
- Green financing:
  - 2019 green bond issuances: €861 million and US$1.4 billion to finance electrified public transport, solar projects, energy efficiency, renewable energy, water management and green buildings;
  - ESG bonds form around 30 percent of Chile’s stock;
  - 2022 Sustainability Linked Bond (SLB) of US$2 billion maturing in 2042, with funds tied to sustainability performance targets including:
    - achieving annual GHG emissions of 95 MtCO2e by 2030;
    - achieving a maximum GHG budget of 1,100 MtCO2e between 2020 and 2030;
    - achieve 60 percent electricity generation derived from non-conventional renewable sources by 2032.

### Economic assessment and policy scenarios using CPAT
- The analysis uses the Climate Policy Assessment Tool (CPAT), a spreadsheet model projecting fossil fuel CO2 emissions and the emissions, fiscal, economic, energy price, public health and distributional implications of carbon pricing and other mitigation instruments.
- CPAT projects Business-As-Usual emissions using:
  - GDP forecasts;
  - assumptions about income elasticity of demand for electricity and other fuel products;
  - rate of technical progress;
  - future energy prices.
- The impact of higher carbon tax and other mitigation policies is determined by effects on future energy prices, induced switching of fuels within power generation, and price elasticities for electricity and fuel use in other sectors.

### Scenarios and numeric policy paths (preserve exact values)
- Base Scenario:
  - carbon tax set at US$15 per ton of CO2 in 2024, increasing linearly to US$60 per ton of CO2 in 2030;
  - carbon tax excludes gasoline and diesel, but the excise on diesel is increased to bring the effective carbon rate equal to that of gasoline (starting from US$0.05/liter in 2024 and increasing linearly to US$0.37/liter in 2030).
  - This Base Scenario (carbon tax + diesel excise increase) will help Chile reach its NDC target.
- Social Cost of Carbon (SCC) scenario:
  - requires a higher initial carbon price of US$35 in 2024, gradually increasing to US$75 by 2030 to reach the 2030 NDC target with carbon pricing alone.
- Net-zero by 2050 trajectory:
  - to stay on track to net-zero by 2050, the carbon price will need to reach US$150 by 2030 and the scope of the tax must be broadened to all sectors and fuel types.
  - To keep on this emission reduction path solely through use of a carbon tax, Chile will need to continue to raise the price of carbon beyond 2030.
- Transition risk management:
  - a gradual rise in the carbon price should be balanced with current higher-than-usual energy prices;
  - revenue from a higher tax could be recycled to dampen short-term costs and serve as a tool for income redistribution to low-income households.

*Prepared By Christopher Evans (RES) and Karlygash Zhunussova (FAD).*

### 20.      Increasing the carbon price and expanding coverage is expected to induce a fall in

### 1chlea2023003 - 20.      Increasing the carbon price and expanding coverage is expected to induce a fall in

### Emissions and sectoral impacts
- Expanding and increasing the carbon price following the Base Scenario (a rise in the carbon tax to US$60 by 2030 and an increase in the excise on diesel) would foster a fall in emissions across the economy.
- The power sector, previously the most pollutant, would become one of the greenest sectors as renewables become the primary source of energy generation.
- Falling emissions are also expected in the transport and industry sectors.
- The SCC scenario sets the economy-wide carbon tax at US$35 per ton of CO2 in 2024 and increasing linearly to US$75 per ton of CO2 in 2030.
- Proposed carbon pricing scenarios would need to be re-calibrated if used in conjunction with other emission mitigation policies to determine the required carbon price needed to reach Chile’s NDC and net-zero goals.

### Revenue mobilization and recycling
- Carbon pricing could amount to US$5 billion or 2 percent of GDP in revenue by 2030 in the Base Scenario.
- If the carbon tax is gradually increased to US$60, combined with an increase in the excise on diesel by 2030, it could be a significant source of revenue.
- The largest source of revenue from the carbon tax and excise duty is expected through diesel; the second largest source is expected from natural gas.
- A higher carbon price typically impacts richer households more through higher fuel prices (direct effect); poorer households are negatively impacted by rising prices of nonfuel goods (indirect effect).
- On its own, a higher carbon price would lead to lower consumption across all income deciles; however, revenue recycling into public investment and targeted transfers can make the policy progressive and benefit the poorest.
- Recycling revenue to public investment projects (e.g., improvements in public transport and infrastructure investment) can dampen negative short-term growth effects and help increase growth after transition to a higher carbon price.

### Broader benefits of a higher carbon price
- Electricity generation from highly pollutant fuels (coal) is expected to fall as the user cost of coal rises relatively more than less pollutant sources.
- The higher carbon price aligns with government policy to close half of coal-fired power plants by 2025 and remove all coal power plants by 2040.
- Renewable energy shares (wind, solar, hydro) are expected to increase as they are less affected by the carbon price and become relatively cheaper.
- Staff simulations show that by 2030 around three quarters of electricity generation in Chile will come from renewables if a higher carbon price is introduced.
- In the Base Scenario, more than 1000 deaths due to air pollution are expected to be avoided.
- A higher carbon price will increase the price of conventional car use and incentivize public transport use, helping to reduce road accidents.

### Opportunities from the global green transition
- Under a net-zero global emissions scenario, the global price of lithium is expected to rise several hundred percent from 2020 levels, which combined with higher demand for copper, could increase Chile’s export revenues from lithium by a factor of 50 and double copper export revenue.
- Chile was 2nd in the world in lithium mining in 2021 and has large reserves.
- Batteries are the main use of lithium (74 percent) globally; ceramics and glass are the second most common use (14 percent).
- Chile is the world's top copper exporter; in a net-zero global scenario, copper prices would increase more than 60 percent by 2040 from 2020 levels.
- National Strategy for Green Hydrogen: Chile aims to become one of the lowest-cost green hydrogen producers by 2030 and one of the largest exporters by 2040.
- In 2021, CORFO pledged US$50 million in grants to six green hydrogen projects, with an additional three agreements signed in 2022.
- Success of low-cost green hydrogen production hinges on the expansion of renewable energy.

### Lithium production and reserves in 2021 (Tons)
- Australia: Mine Production 55,000; Reserves 5,700,000
- Chile: Mine Production 26,000; Reserves 9,200,000
- China: Mine Production 14,000; Reserves 1,500,000
- Argentina: Mine Production 6,200; Reserves 2,200,000
- Brazil: Mine Production 1,500; Reserves 95,000
- Zimbabwe: Mine Production 1,200; Reserves 220,000
- Portugal: Mine Production 900; Reserves 60,000

### Green Taxes (policy design and revenue)
- In 2014, Chile introduced a tax reform bill that included 3 green taxes, implemented in 2017.
- As of 1 January 2017, green (Pigouvian) taxes came into force.
- The three taxes: (1) CO2 emissions from stationary sources with boilers and turbines (sum over 50MW); (2) local contaminants on stationary sources with boilers and turbines (PM, SO2 and NOx); (3) a tax on the first sale of new cars accounting for expected NOx emissions over their lifetime.
- The tax on the global pollutant is fixed at US$5 per ton of CO2.
- The local pollutant tax (Tij) depends on air quality (CCA_j), population (Pob_j), and the social cost of the pollutant (CSCpc_i) and is calculated as: Tij = 0.1 * CCA_j * CSCpc_i * Pob_j.
- The tax raised US$191 million in its first year of operation; CO2 tax accounted for 88% of the total, local pollutant taxes accounted for 12% (PM 8%; NOx 3%; SO2 1%).
- The tax has brought in around US$200 million each year from 2017-2020.
- The tax reform law of 2020 updated the scope of the green tax and allows offsets starting in 2023.
- From 2023, the threshold for taxation changes to sources that are emitting 25,000 tons of CO2/year or 100 tons of PM/year, regardless of size or characteristics of the technology; the reform introduced the ability to implement projects that reduce pollutants to offset emissions against the green tax.

### Conclusion and policy implications
- Staff simulations based on CPAT suggest a gradual increase in the carbon tax to at least US$60 by 2030, coupled with a higher excise for diesel, would be needed to reach NDC goals.
- The 2030 NDC target could also be reached by an increase in the carbon tax alone to US$75 by 2030.
- A carbon tax of US$150 would allow Chile to stay on track to net-zero.
- These estimates need re-calibration if combined with complementary measures to curb CO2 emissions.
- Prudently recycling revenue to productive infrastructure projects, health and education spending, and targeted transfers can make the carbon price progressive, benefit vulnerable households, and boost future growth.
- Staff estimates that a US$60 carbon price, a higher excise on diesel, and the planned reduction of coal in electricity usage by over half by 2025, could result in around three quarters of electricity generation in Chile stemming from renewables by 2030.
- An institutional framework for lithium needs to be developed to accelerate growth in the sector to seize rising global demand and price of lithium.

*International Monetary Fund — Chapter/section content provided in the source PDF.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1chlea2023003.pdf_