Resumen:
 

In general, special tax regimes create inefficiencies and might destroy horizontal equity. However, many countries have special tax regimes for small businesses or specific economic sectors. The goal is usually to reduce compliance costs, but also to reduce inequality since it is assumed that owners of small businesses are generally low-income taxpayers. To study the magnitude of tax avoidance of special tax regimes in Chile and their effects on horizontal equity, I use administrative data from the Chilean IRS to simulate a tax reform that replaces them with a cash flow tax for small firms. The results show that a reform of this type would have positive effects, especially in terms of horizontal tax equity as 85.6% of the profits from firms under presumptive taxes and 77.6% of the profits from the small firms under special tax regimes, belong to taxpayers in the top income decile.