Chile: Technical Assistance Report-An Evaluation of Improved Tax Options

IMF Staff Country Reports, January 19, 2023

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Chile: Technical Assistance Report-An Evaluation of Improved Tax Options

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Bibliographic details

• Published: January 19, 2023
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9798400229381.002

Executive summary and context

• Presents an evaluation of improved Green Tax Options for Chile.
• Notes Chile has developed multiple climate policies consistent with its emission reduction ambitions.
• States that additional mitigation efforts are required to reach emission reduction targets in 2030 and by mid-century.
• Reports that the Ministry of Finance announced improvements to green taxes will be included in the general tax reform presented to parliament in July 2022.
• Notes Chile has five years of experience administering green taxes, implying further carbon pricing enhancements should leverage existing institutional capacity without adding significant administrative burden.

Scope of the report

• Evaluates existing green taxes in Chile, including:
  • revenue performance,
  • coverage,
  • selected design issues.
• Discusses changes that will take effect in 2023.
• Discusses new mitigation tools introduced in the Framework Law on Climate Change.
• Uses the Climate Policy Assessment Tool to evaluate different scenarios to improve carbon pricing.

Scenarios and evaluation metrics

• Climate Policy Assessment Tool scenarios assessed to bring the country closer to or in line with its climate targets.
• Results are presented in terms of:
  • emissions reduction,
  • revenue-raising potential,
  • effects on gross domestic product and energy prices,
  • distributional impacts across households and firms,
  • abatement costs,
  • co-benefits.

Findings and analytic focus

• Emphasizes trade-offs between emissions reductions and economic indicators (GDP, energy prices).
• Highlights distributional impacts and differential effects on households and firms.
• Quantifies abatement costs and co-benefits under alternative carbon pricing scenarios (specific scenario results are in the full report).

Policy recommendations and revenue use

• Offers different options to recycle revenue from higher carbon pricing.
• Recommends revenue recycling to help prepare a well-thought-out reform communication strategy.
• Suggests leveraging existing institutional capacity to minimize additional administrative burden when enhancing carbon pricing.

Publication and metadata

• Pages: 49
• Volume: 2023
• DOI: https://doi.org/10.5089/9798400229381.002
• Issue: 035
• Series: Country Report No. 2023/035
• Stock No: 1CHLEA2023001
• ISBN: 9798400229381
• ISSN: 1934-7685
• Subject: Carbon tax, Climate policy, Environment, Greenhouse gas emissions, International organization, Monetary policy, Taxes
• Keywords: C. energy price, Carbon tax, Caribbean, Climate mitigation policy carbon pricing carbon taxation climate change emissions energy, Climate policy, Global, Greenhouse gas emissions, IMF Fiscal Affairs Department, Ministry of Environment discussion, Ministry of Finance staff, output price increase, Western Hemisphere

International Monetary Fund. Fiscal Affairs Dept. "Chile: Technical Assistance Report-An Evaluation of Improved Tax Options", IMF Staff Country Reports 2023, 035 (2023).

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