Tax system to get complete overhaul


The Cuban government will completely overhaul the country’s tax system, Vladimir Requeiro, deputy chief of the Oficina Nacional de Administración Tributaria (ONAT), announced on state TV.

The overhaul of the tax law of 1994 is occurring as the number of self-employed Cubans is skyrocketing. As of early May, more than 300,000 Cubans were licensed to operate small businesses, up from 130,000 in October last year, when the government began issuing self-employment licenses. Officials announced in May that all private businesses will be allowed to hire; however, a 313-point document outlining economic changes outlines progressive employment taxes that increase with the number of employees of a company.

According to the “Guidelines” document, the new businesses must pay 25 to 50 percent taxes on profits, 10 percent sales or service tax, 25 percent employment tax, and 25 percent social security contribution.

Requeiro said that tax rates will be according to income bracket, and that agricultural producers benefit from a special tax system to stimulate food production.

Most Cubans have never had to pay taxes. Even so, Cuban economists expect the government to collect hundreds of millions of dollars of tax revenues this year from private businesses.

Soruce: Cubastandard.com

Cuba set for new revolution but US thaw could be a long way off


Irish Times: OPINION: Shedding public sector jobs, bolstering domestic enterprise while seeking foreign investment – does this sound familiar? Welcome to Cuba . . .

CUBANS HAVE entered a period of dramatic change with enormous implications for economic, political and social aspects of their lives, perhaps not seen since the collapse of Cuba’s old sponsor, the USSR.

With that cataclysmic break-up in the early 1990s, some 85 per cent of the Caribbean island’s income vanished, marking the start of a period of extreme hardship remembered bitterly as the Periodo Especial .

Not least among the changes now deemed necessary to deal with the country’s troubled economy by President Raul Castro is the laying off of 500,000 state employees between this month and the end of March. Effectively, this ends Cuba’s official policy of full state employment, with some commentators saying these changes could even mark the beginning of the end of the 50-year socialist economic experiment for the country’s 12 million people.

The demise of communism and the Castro brothers, Raul and Fidel, however, have been predicted many times before – indeed their deaths were once reported in a US newspaper by an Irish-American journalist in 1956 shortly after they had landed in Cuba from Mexico with a small group to begin the final phase of the revolution.

Despite the scale and scope of the proposed changes, however, President Castro is anxious to insist that the essential nature of the last communist state in the western hemisphere will not itself change. A recent 32-page document outlining proposed changes, Draft Guidelines for Economic and Social Policy , emphasised that “as we update our economic model, planning will be paramount, not the market”.

Preparing people for such seismic changes, Castro had said that Cuba would “fall off a cliff” if it did not make savings through efficiencies and “update” the tightly-controlled command economy. He said the economy was the first order of business for all the political leaders.

The measures are intended not only to correct the economy but to deliver improvements in living standards that ordinary Cubans have long and patiently desired. Most prominent of the changes are the dramatic shrinking of state employment; a significant expansion of the private sector; the encouragement of greater foreign investment in designated economic zones (not dissimilar to Vietnam and China, it appears); and a partial opening up of the property market, in which you may buy and sell property, but not accumul-ate.

On a recent visit to China, Cuban parliament speaker Ricardo Alarcon said: “Cuba is prepared to take advantage of China’s experience of development in reform and opening.”

China, now a major trading partner, recently signed a $6 billion (€4.53 billion) deal to upgrade an oil refinery and build a gas refinery in the southeastern city of Cienfuegos. This will process huge finds in the Cuban section of the Gulf of Mexico expected to come online this year.

More than 30,000 Cubans have already received licences to work privately as restaurateurs, mechanics, hairdressers and street vendors, for example, and for the first time such individuals may be allowed to take on employees and must pay taxes. As many as 250,000 licences may be issued eventually. Brazil, Latin America’s emerging economic superpower, has offered to share with Cuba its expertise in private enterprise.

Ordinary Cubans fear that if there is no match between jobs created in the private sector and the lay-offs, there will be a negative impact on the country’s social cohesion that full employment has delivered over the past half century. For example, it is feared that street crime, which is negligible by international standards, will rise.

Furthermore, Cubans express various degrees of anxiety as to whether they might be among the half million selected for efficiencies in the notoriously sluggish and bureaucratic state sector.

Alarm bells will also be ringing in Washington because of the potential for another mass wave of immigrants from Cuba.

Significantly, a long-awaited Communist Party Congress – the party forum which defines major policy issues and announces changes, but has not met since 1997 – has now been called for the end of April. At this meeting the proposals in the draft document and measures already taken will be discussed, and the shape of the new political order in Cuba will become clearer.

Cuba’s change in course is further hard evidence of Raul Castro’s shift away from the doctrinaire communism of his elder brother Fidel towards a more pragmatic, efficiency-socialism model. This approach was also evident recently with the state’s agreement with the Cuban Catholic Church and Spain to release more than 50 political prisoners, and with the opening of a Catholic seminary outside Havana, the first since the revolution.

All of this would suggest that now would be a fruitful time for the US to engage with Cuba, as indeed President Barak Obama promised in the early days of his presidency, which President Castro said he would respond to “measure for measure”.

However, the US economic downturn and mid-term elections have since changed the situation and the Republican Party’s control of the House of Representatives has given it sway over the powerful Foreign Relations Committee. From January, this committee will be chaired by Cuban-born, far-right Florida Congresswoman Ileana Ros-Lehtinen, best known for her visceral hostility towards the Cuban regime and other left-leaning administrations in Latin America.

In a 2006 Channel 4 documentary on the numerous attempts to kill the then Cuban leader, she was happy to announce: “I welcome the opportunity of having anyone assassinate Fidel Castro.”

So despite Cuba signalling an historic change in the state’s relationship with private enterprise, bar unforeseen circumstances it seems any likelihood of the US engaging with the new situation is likely to founder on the jagged rocks of old southern Florida émigré politics.

www.particularcuba.com

Amid Doubts, Cubans Pursue Private Sector Dreams


Postchronicle.com: For some, it is the pursuit of a dream, for most, a necessity. Whatever the motive, a steady stream of Cubans are taking the government up on its offer to let them work for themselves instead of the state.

At municipal labor offices around the country, Cubans are filing in with plans that include everything from opening small restaurants to renting out rooms as they seek one of 250,000 self-employment licenses to be issued in Cuba’s biggest reform in years.

About 30,000 of the permits have been handed out, state-run press reported, and another 16,000 are pending in the first few weeks of President Raul Castro’s plan to improve the Communist-led island’s economy by expanding the private sector and cutting government’s role.

The licenses are key to Castro’s gamble that he can slash 1 million jobs from state payrolls, absorb the unemployed through private businesses and keep Cuba on the socialist straight-and-narrow for years to come.

The government, which controls most of the economy and employs 85 percent of Cuba’s workforce, has outlined 178 jobs or sectors where self-employment will be permitted. It will retain a heavy dose of control through regulations and stiff taxes of 25 percent to 50 percent of net income.

The reform is criticized by some experts as being too limited, but others view it as a reasonable first step toward greater change in one of the world’s last Communist countries.

Clutching a raft of government forms, license applicants wait in line for an opportunity they say is welcome and, despite worries about their chances for success, worth a try.

“I have always wanted to have my own business,” said Ismael Hidalgo, who plans to leave his construction job and do what he always wanted to do — raise animals for sale.

“I think the measures they are taking are very good. Let each one live from what they are capable of doing. Let them live from their own sweat,” he said, standing outside a dimly lit government office in Central Havana.

Maria Caridad Sulton, who will open a small cafeteria, said: “I hope that everything goes better. I think that workers will be able to see the fruit of their labor and a little more.”

SMALL EXPECTATIONS

Like most of the applicants interviewed, Caridad said she does not expect to make a lot of money, only enough to supplement a meager pension.

Cubans receive various social benefits, but they earn an average salary equivalent to about $20 a month and insist that they need more to live.

“Necessity, necessity and more necessity. If I didn’t have the necessity, I wouldn’t do this,” said Caridad’s husband, Pedro Sarracent Belon, a retired weight lifting coach. “This is a plan for surviving.”

He and others share a concern that taxes and regulation may be too big a burden for the new entrepreneurs, particularly in a country where taxes have been almost nonexistent under the Communist government installed after the 1959 revolution.

“I was born in this revolutionary process and I don’t know what taxes are,” said Sarracent, 56. “I’m doing this test, but I think there are going to be a lot of failures.”

Yudenia Artiles, who plans to sells snacks in the street, was equally skeptical because of taxes, but also because she believes Cuba’s economic problems will get worse with the planned government layoffs.

“There’s no money,” she said. “Now the war is going to be in the street, a lot of competition between vendors in the street, and you’re going to always see problems.”

According to government figures, 20 percent of the licenses granted so far have gone to people who want to sell food.

Like many other Cubans, Artiles has been plying her trade illegally to make ends meet, so a license will allow her to do it without threat of arrest or worse.

She pulled back her shirt sleeve to show a bruised shoulder that she blamed on a whack from a baton-wielding cop.

“The police mistreat you a lot. I have a ‘bastonazo’ from a policeman for illegally selling sweets,” she said.

There are other worries as well.

Many people fear that the government will open the door to private enterprise, then close it as it did during the economic crisis of the 1990s.

While that experience has discouraged some would-be entrepreneurs, it helped Emilio Perez decide to seize the moment and seek a license to rent out a room in his house and to sell food.

“You have to grab this chance. It’s now or never,” he said. “This is Cuba, what will happen tomorrow, I don’t know, but he who doesn’t take the risk neither wins nor loses.”

www.cubaluxuryrent.com

Cuba to allow modest economic reforms


HAVANA, Nov. 10 (UPI) — Cuba will allow more private business and foreign investment, but the basics of socialism will remain, the Communist Party is saying.

“Only socialism is capable of … preserving the gains of the revolution,” declares a 32-page document published Tuesday as a guide for discussion leading up to a party congress in April, El Nuevo Herald in Miami reported. It also says, “Planning will be paramount, not the market.”

President Raul Castro already has put many of the proposed changes into effect, including allowing more self-employment and cooperatives, and encouraging foreign investment and tourism.

The food ration card, which provides 10 days’ worth of food per month, will be “eliminated in an orderly fashion” in a drive to cut subsidies, the party paper said.

The document also suggested opening the real estate market, but warned that “the concentration of properties” will not be permitted.

Raul Castro said the guidelines were submitted before publication to his brother Fidel, who is still first secretary of the Communist Party.

www.particularcuba.com

Cuba slow to ease its grip on shopkeepers


FT.com:

Three years after Cuba’s Rebel Youth newspaper published “The Big Old Swindle” – a scathing series calling for reform of a state-managed retail sector beset by poor management, corruption and abysmal service – debate is still raging over liberalisation. The authorities have yet to act.

Rumours abound in Havana that the state will soon cede control over its thousands of barber shops, cafeterias, bakeries and domestic appliance and car repair businesses, opting to regulate and tax rather than administer, along the lines of the Chinese or Vietnamese model.

Yet the state appears to be doing the opposite, remodelling and opening numerous restaurants, shops and other retail outlets in city after city.

Raúl Castro, president, has insisted that Cuba’s Soviet-style command economy needs fixing. He has hinted that ways must be found to reform the retail sector since taking over from his ailing brother, Fidel Castro, two years ago.

“State companies must be efficient and so must have resources to be so. The rest should adapt to more adequate forms of property given the resources available,” stated a report by the economy ministry last year soon after Mr Castro replaced the minister and his top deputies.

Mr Castro has been short on specifics. However, commentators, economists and analysts propose raising the small number of family businesses and allowing employees to form co-operatives like those long established in agriculture.

There is apparently fierce resistance within the ruling Communist party, especially in the provinces.

“Cuba is not Havana,” a provincial-level party official in eastern Cuba quipped when asked to square the new government-run retail outlets with the idea that the state should get out of the sector.

Pressed, he conceded that the state did not need to run some services, such as every barber shop. But he opposed letting go of larger establishments, such as car repair shops.

“Most cars and trucks in this country are owned by the state,” he said.

A mid-level party cadre who administered eateries in the eastern city of Santiago de Cuba insisted the retail sector’s poor performance was not systemic but subjective. Fixing it was just a matter of improving party discipline, she said.

Cuba’s second city has opened more restaurants, bars, stores and other establishments during the past year than any other.

The administrator, speaking on condition of anonymity, said the province’s new party leader, Lazaro Exposito Canto, had improved the sector. “Since his arrival the retail sector has been completely turned round. It is a matter of caring about the people and being demanding with subordinates,” she said.

The debate has spilled into the pages of Granma, the Communist party daily, which has carried letters to the editor for and against reform. “We have to shake off the stereotype developed over many years that private property is always evil,” González de la Cruz wrote in a recent edition.

“Property, state or private, is valid when it serves a social purpose,” he said.

The opposing view was best expressed in Granma by Guerra González, another correspondent.

“The solution of creating new owners and co-operatives and making current employees into supposed collective owners [in the retail sector] will only lead to uncontrolled free competition and capitalism,” he wrote, adding, “this would represent not only an economic step backward but a political, social and ideological one”.

For the first time since all retail activity – right down to shoe-shine boys – was nationalised in the “revolutionary offensive” of 1968, licences are being handed out to food vendors in the interior who have played cat-and-mouse with police in city streets for decades, saving residents a long walk to state markets.

But that appears to be part of reform already under way in the agriculture sector, where decision-making and food distribution has been decentralised and state lands leased to more than 100,000 farmers.

Authorities, in an apparent concession to popular frustration, are also granting family farms and cooperatives permission to sell a part of what they produce directly using kiosks and horse and bicycle-drawn carts. But not a single state-run retail outlet has been handed over to employees as a co-operative, let alone privatised.

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