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Global Tax 50 2016: Rodrigo Valdés

13 December 2016

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Minister of finance, Chile

Rodrigo Valdés
Rodrigo Valdés is a new entry this year

Chile's finance minister Rodrigo Valdés is a friend of the business market. The 50-year-old, whose CV includes stints as chairman of state-owned BancoEstado, and as an economist at the Central Bank of Chile, Barclays and BTG Pactual, was appointed as finance minister on May 11 2015 after a cabinet reshuffle by President Michelle Bachelet.

Valdés took on the position at a time when Chile was undergoing financial scandals, a slowing economy and stalled reform. Far-reaching structural tax reforms were promised during President Michelle Bachelet's 2013 election campaign by the end of her term in 2018. However, this was overestimated and was not well received. Leading economists commented on his appointment as being "market-friendly". Antonio Moncado, an economist at Banco de Credito e Inversiones in Santiago, said on the day of his appointment: "Valdés is a friend of the market, but this is not a change in direction, it is a moderation of tone. The reforms will continue, but their implementation is going to be more negotiated with the private sector."

Tax evasion is one of the main challenges to tax systems in most Latin American and Caribbean countries. In 2010, evasion rates rose to 24.8% in Chile, according to the 2016 edition of Fiscal Panorama of Latin America and the Caribbean. However, more recently, Chile's fiscal state is beginning to show signs of change in the non-compliance trend. This has to do with Chile's broad trade and financial openness, as a large proportion of VAT revenue enters the country through customs. During his time in office as finance minister of South America's second wealthiest nation per capita, Valdés has kept a tight rein on fiscal spending, ensuring the highest credit rating in Latin America and the lowest rates in government debt. Chile also still has the second-lowest tax burden out of OECD member states.

Chile's continued efforts to stop tax evasion have been strengthened by developments such as the double taxation agreement with Argentina. Valdés signed the treaty with Argentina's finance minister Alfonso Prat-Gay to encourage investment and prevent tax evasion between the two countries. The officials said that, as soon as the agreement takes effect on January 1 2017, "there will be a framework of clear rules to promote the development of commercial activities, services and investment between the two countries".

Valdés added that "eliminating the barriers caused by double taxation will usher in a greater flow of investment, trade, services and technologies between our countries that gives businesses the tax certainty they need, within a structure of legal certainty and respect for the principles of market competition, balanced public finances and protection of taxpayers' rights."

Valdés believes that fiscal policy is a crucial part of economic policy. At the Economic Commission for Latin America and the Caribbean Seminar, Valdés said that economic policy was being formulated with much uncertainty. He explained that the challenge for tax reform, in Chile and other countries, was to fund expenditure with higher revenues and structural change.

Other noteworthy developments include Chile's first five years as a member of the OECD. Celebrating this achievement, Chile chaired the 2016 OECD Ministerial Council meeting this June in Paris. Continuing with these efforts, the government declared 2016 the year of productivity.

"We presented a set of new structural reforms to improve productivity by decreasing financing costs for entrepreneurs and small businesses, simplifying administrative procedures to cut red tape, and implementing changes aimed at increasing services exports," Valdés said during the two-day meeting. "The private sector has also done its part: the Business Association proposed more than 100 measures to eliminate obstacles to productivity improvements for Chilean firms. Soon, the Workers' Union is expected to launch a proposal to enhance workers' productivity." Valdés has cemented his place in this year's Tax 50 for his efforts to keep both the government and private sector working together to increase tax certainty.

The Global Tax 50 2016
View the full list and introduction
The top 10 • Ranked in order of influence
1. Margrethe Vestager 2. The International Consortium of Investigative Journalists
3. Brexit 4. Arun Jaitley
5. Jacob Lew 6. Antoine Deltour and Raphaël Halet
7. Operation Zealots 8. Guy Verhofstadt
9. Theresa May (and the 'three Brexiteers') 10. Donald Trump
The remaining 40 • In alphabetic order
Kemi Adeosun Piet Battiau
Elise Bean Monica Bhatia
Allison Christians Tim Cook
Rita de la Feria Caroline Flint
Judith Freedman Chrystia Freeland
Pravin Gordhan Orrin Hatch
Meg Hillier Mulyani Indrawati
Lou Jiwei Paul Johnson
Stephanie Johnston Chris Jordan
Pravind Jugnauth Wang Jun
Jean-Claude Juncker Kathleen Kerrigan
Christine Lagarde Werner Langen
Jolyon Maugham Angela Merkel
Narendra Modi Will Morris
Michael Noonan Grace Perez-Navarro
Platform for the Collaboration on Tax Donato Raponi
Pascal Saint-Amans Heather Self
Robert Stack Tax Justice Network
The Gulf Cooperation Council (GCC) Transparency International
US Committee on Ways and Means Rodrigo Valdés

International Correspondents