(Adds comments from business chamber, finance minister, further CMPC comments, context)
By Felipe Iturrieta
SANTIAGO, April 22 (Reuters) - Chilean forestry firm CMPC said it would “probably” revise investment plans if a tax bill currently passing through Congress becomes law, joining a growing number of companies who say the proposed rules will have a negative effect on business.
The legislation seeks to gradually increase the country’s tax take in order to fund an education overhaul. That includes higher corporate taxes and the elimination of a mechanism by which companies can gain tax exemptions on reinvested profits.
“A great part of the investment that the company has made has been financed with the reinvestment of profits and these incentives are obviously going to end from 2017 if the tax reform is approved,” said CMPC Chairman Eliodoro Matte at the company’s annual general meeting on Tuesday.
“We are pretty much maxed out credit wise, so probably we are going to have to revise our investment plan.”
Although CMPC is the first major Chilean company to warn it would likely scale back spending due to the reform, other business leaders and right-wing opposition politicians are becoming increasingly vociferous on what they say are changes that disincentivize investment just as growth in the top copper exporter is slowing.
“At times you get the feeling that there is a lack of maturity in the reform in terms of the evaluation of the possible negative effects on the economy and production,” said Peter Hill, the head of Santiago’s chamber of commerce, on Tuesday, at a meeting of the group to analyze the reform.
Last week, Andronico Luksic, one of Chile’s wealthiest businessmen, criticized the bill and said its effects would be “negative”. His family’s bottling and brewing company CCU will likely be hit by increased taxes on alcohol and sugary drinks.
However, the government insists the reforms make long-term sense and are in line with other countries’ moves in the path towards development.
The bill is currently being revised by the lower house finance committee, which has given the green light to its key proposals. It is expected to be eventually approved by Congress, where center-left President Michelle Bachelet commands a majority.
“We are pleased that the tax reform bill carries on progressing in the finance committee and having support from an important majority, which we hope will be the case in the chamber and Senate,” said finance minister Alberto Arenas on Tuesday.
For a FACTBOX on the reform, see.
CMPC is one of Latin America’s biggest forestry companies. Its products include wood, plywood, cellulose used for paper, cardboard, tissue and boxes.
It was recently downgraded to BBB-, one notch above junk, by Standard & Poor’s as it has taken on debt to fund an expansion of its giant cellulose plant in Guaiba, Brazil.
Despite the company’s concerns, shareholders approved an up to $250 million capital hike at the meeting. (Writing by Rosalba O‘Brien; Editing by Andrew Hay)