Tax benefit of the donations made to universities and professional institutes in Chile

Abstract

This investigation analyses the effect on the distribution of monetary resources that the Taxpayers of the First Category Income Tax who make donations to universities and higher education institutions have to face, according to article 69 of Law 18.681. The latter provision, considered as a "tax benefit", grants a credit of 50% of the donated amount, considering the other 50% as an accepted expense if it complies with the requirements of paragraph 7 of article 31 of the Income Tax Law. The main objective is to determine the effect of such benefit on the flow and reflect on the effectiveness of the resources generated in the Fiscal Year 2018 Tax Operation.

Qualitative research was carried out to analyse the dispositions of the above-mentioned Law through a tax microsimulation process based on the generic data of the taxpayers who made the donations to illustrate the effects obtained. Subsequently, a numerical exercise was determined, which specified the result of applying the provision, to analyse later the general figures that the Internal Revenue Service reported on the Fiscal Year 2018 Tax Operation statements.

 As a result, the net social flow was $12,750 MM, understood as the total of resources that were applied to higher education institutions as donations (qualitative assessment). It was also determined that the provision under study is not a benefit but a "prize" that the legislator grants to the taxpayers who make donations for altruistic reasons.