Attributed Income or Partially Integrated Regime? Greater Complexity and Less Equity

Abstract

The 2014 tax reform was one of the main initiatives promoted by the government of President Michelle Bachelet. The objectives of this measure were to increase tax revenue, advance tax equity by improving income distribution, introduce savings and investment incentives, and drive measures to reduce evasion and avoidance. Among the main elements of this reform is the possibility of opting between two income tax regimes that came into force on 1 January 2017: the attributed income regime and the partially integrated regime. This article analyzes the increase in complexity associated with this new tax scheme and the difficulties this choice entails for small and medium-sized business owners. It proposes a trial period and the development of tools to help taxpayers understand the economic implications of choosing a tax regime.