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Greg Kahn / Getty Images, file
A street market sells necklaces and bracelets in Old Havana on November 12, 2012 in Havana, Cuba. Shops like this, until a year ago, were only found in the black market.
HAVANA -- Most Cubans have not paid taxes for half a century, but that will change under new regulations starting January 1.
The landmark move will change the relations of Cubans with their government and are a signal that market-oriented reforms are here to stay.
They were launched after President Raul Castro succeeded his brother, Fidel Castro, in 2008.
The recently published code constitutes the first comprehensive taxation in Cuba since the 1959 revolution abolished just about all taxes.
In the 1990s after the collapse of the Soviet Union, the country's main benefactor, the Cuban government imposed a few scattered taxes, but mostly preferred to maintain low wages so it could fund free social services.
The government's free-market reforms introduced over the last two years are designed to encourage small businesses, private farming and individual initiative. There are also plans to pay state workers more.
Under the new tax code, the state hopes to get its share of the proceeds.
'Major step' toward 21st century
The government also envisions replacing subsidies for all with targeted welfare, meaning that the largely tax-free life under a paternalistic government is on its way out.
"This radically changes the state's relationship with the population and taxes become an irritating issue," said Domingo Amuchastegui, a former Cuban intelligence analyst who lives in Miami and writes often about Cuba.
Traveling to Cuba is now easier for Americans and Cuban exiles because the government has relaxed years of restrictions on who can visit.
A Western businessman who has worked in Cuba for almost two decades told Reuters the reforms would take time, but added, "this is of course a major step forward toward the 21st century and a modern state."
The new code covers 19 taxes, including such things as inheritance, environment, sales, transportation and farm land, various license fees and three contributions, including social security.
Cuba issue deals blow to US stature at 'Summit of the Americas'
A sliding-scale income tax -- from 15 percent for annual earnings of more than 10,000 pesos (about $400) to 50 percent for earnings of over 50,000 pesos (about $2,000) -- adopted in 1994, remains in the new code for the self-employed, small businesses and farms.
It also includes a series of new deductions to stimulate their work. For example, farmers may deduct up to 70 percent of income as costs.
'Can't spare a single peso'
Eventually all workers will pay income taxes as well as a new 2 percent property tax, but both measures are suspended until "conditions permit" them to go into effect.
The government admits, with an average pay of about 450 pesos per month (or $19), many workers do not earn enough to make ends meet.
Cuba to let its people leave the country?
"They collect taxes for all these things around the world, it's normal," said Havana economist Isabel Fernandez.
"But here we face two problems. On the one hand we are not used to paying for anything and on the other our wages are so low we can't spare a single peso," she said.
Under the old system, large and small state-run companies, which accounted for more than 90 percent of economic activity, simply handed over all their revenues to the government, which then allocated resources to them.
Cuba detains 70 'Ladies in White' ahead of Pope visit
The reforms call for large state-run businesses to be moved out of the ministries and become more autonomous.
The state-owned Cuban National News Agency said Cuba had studied the tax systems of a number of other countries, including several with capitalist economies.
"The experiences of China, Vietnam, Venezuela, Brazil, Spain and Mexico were taken into account, but they were refined to the particularities and conditions of the island," the news agency said.
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Leave a Comment:
so now even the cubans are abandoning grover norquist?
Sounds like Cuba needs a few republicans over there to prevent this new tax from taking place and stall the economy forever.
I'm not sure this indicates a Cuban failure as much as an American success. After all for over 50 years we did everything possible to ruin their economy, and make life miserable for Cubans.
@Dick ....did "we" create socialist republic in Cuba? Did "we" put a dictator in power? Don't be absurd.....All "we" did was not enable the regime and the people suffered at the hands of a tyrant. You must be one of the fools who still thinks this form of government actually works.
Dick,
What did "we" do to riun their economy?
The revolution that created the current government was brought on by the Cuban people in order to remove the dictator we installed into power.
The sanctions that we imposed after Castro seized power achieved absolutely nothing.
Assuming that someone who points out our failure in Cuba does not automatically mean that the person thinks that form of government is desirable or that the person think it works. It clearly doesn't but that's none of our business in any case.
Embargo?
They've achieved the ultimate in soft socialism-- taxation without representation.
Redphish....Dick is clearly blaming the US for a failed regime in Cuba....Once the Soviet Union collapsed there was no one left to subsidize Cuba. We were never obligated to support them. Especially when they were pointing missiles at us. @ Devils son...The embargo was an attempt to influence Cuba's people to revolt. Unfortunately that never happened.
The embargo was retaliation for nationalizing our companies' operations there.
Peanut ...Yes ...you are correct. There were many reasons for it ....Don't you think that is another good reason we would be pissed at the regime ?
Devils Son,
Congratulations, embargo, you got that right.
However, there was no embargo with Canada, there was no embargo with Mexico, there was no embargo with Brazil, there was no embargo with China. Hmmmm....now that I think of it, there was no embargo with 197 other countries.
So, how did an embargo with just us ruin there economy?
PValdes
True but by what mechanism? Destroying their economy
True we did not put Castro in power. We put Batista in power and the people suffered at his tyranical hands. They revolted against our tyrant. So yes in a way we did put Castro in power and our embargo has given him a propaganda boogieman that has helped keep him in power.
What a Dick!
Here is a link explaining how the embargo damages the economy in Cuba. Also remember that third parties have had to pay millions for doing business in Cuba.
From what I read, there will be people in this country that may be paying taxes for the first time.
Haha, a far-left communist nation is in shambles and the libtards respond by trying to pin the blame on Republicans. Hilarious!
Flat Iron....Moreover they are blaming the entire US Government. Have we not had enough liberals in places of power to lift the embargo in 50 + years ? Thought so...
If Cuba is an evil socialist regime with an unaffective economic model... and they paid no taxes since the commies took over... who is really modeling their platform after the evil regimes of the past? Don'tpretend like there is no buisness in Cuba. There is. It is all run by 1% of the islands population and thats where all the money goes... sound familiar?
PValdes you don't seem too pissed at the Chinese, who treacherously launched an attack, killed thousands of American soldiers in the Korean War and still have nukes pointing at us.
The communist Chinese presidents have been received in the US by both Rep and Dem administrations with ironically the red carpet, but little starving Cuba and the Castro family scare you too much. Give me a break and go to buy Chinese made at your nearest Walmart.
The 1% must be stopped from running any kind of business so they can all be equal.
Romilio ......Don't even get me started on China. That is another discussion . Cuba does not scare me ....My family fled from there to come here....for freedom and worked their ass off. Now they see the same BS happening here. You give me a break ....
So your claim is that being cut off from the world's largest economy had no affect? The United States is the fifth largest exporter to Cuba (6.6% of Cuba's imports are from the US). However, Cuba must pay cash for all imports, as credit is not allowed. Many countries operate on a cash only basis? Hell do many corporations in the US operate that way? It just wasn' the US that embargoed them. In 1962, Cuba was expelled from the Organization of American States (OAS) "by a vote of 14 in favor, one (Cuba) against with six abstentions. Mexico and Ecuador, two abstaining members argued that the expulsion was not authorized in the OAS Charter." Multilateral sanctions were imposed by the OAS on July 26, 1964, which were later rescinded on July 29, 1975.
The 1963 U.S. embargo was reinforced in October 1992 by the Cuban Democracy Act (the "Torricelli Law") and in 1996 by the Cuban Liberty and Democracy Solidarity Act (known as the Helms-Burton Act) which penalizes foreign companies that do business in Cuba by preventing them from doing business in the US. Justification provided for these restrictions was that these companies were trafficking in stolen U.S. properties, and should, thus, be excluded from the United States.
The European Union resented the Helms Burton Act because it felt that the US was dictating how other nations ought to conduct their trade and challenged it on that basis. The EU eventually dropped its challenge in favor of negotiating a solution
PValdes
You are the fool and leech with a lazy family who expects Americans to take care of them just because they floated ashore! Your family came here because they expected us to take care of them better than Castro otherwise they could have floated ashore in Mexico or other countries.
American laws prohibited travel, spending money and all commerce with Cuba through most of those 50 years. If you weren't so stupid you would see trade is the utmost importance for the welfare of any country. If we are free in America why can't I travel to Cuba? America insisted Berlin take down their wall but we built our's higher.
Devils Son,
All the acts and policies that you looked up by doing a simple search, cut and pasted from the Internet (I've seen them to) had very little effect. Been to Canada lately? Canada alone accounts for over 1 billion in trade with Cuba. Look up how much trade is done by the Netherlands, Spain, Argentina, and China. There is nothing made in America that they can't get from these countries.
In fact, their economy was ruined by the fall of the Soviet Union and the policies of Castro. Cuba became dependant on the influx of cash from the USSR. When that stopped they had no economy and they are unable to borrow to jump start it.
They've struggled to export what they can. By the way did you know that includes oil, yes Cuba is an oil producer to the tune of over 1 billion a year in exports. They have some neat partnership agreements going with Venezuela.
In all Cuba does over 9 billion a year in export.
So you need to get off the "America - The Evil Empire" routine.
As for me, I'm lighting up my Cuban cigar, which I got in Canada last week.
@ dick F off ....My family immigrated from Cuba (LEGALLY) over fifty years ago....and built a life here.....without ever ....EVER ...taking any government hand outs. How dare you question my or my families work ethic. You sir ....are an ignorant a**hole !
PValdes if your family emigrated to the US 50 years ago, you don't know about Cuba, you heard about the snapshot of Cuban reality your family took when they left, you are just a parrot repeating what you heard from your family and the dinosaur Cuban-American politicians that are stuck in that time and are unable to move forward; by the way losing more support to their archaic policies against Cuba in every election. Cuba and its revolutionary process is complex and has evolved during time, at this point Cuba is just waiting for their own communist dinosaurs to go into extinction to leap into a new era of freedom, but with its own Cuban flavor.
Romilio.....I have made it my business to learn about my heritage. It is not a snapshot .....It was engraved and burned in their memory. I may not ever have set foot on the island ....but I know its history....and I know the pain they felt leaving loved ones behind. I truly hope that Cuba is on it's way to a prosperous future. I am just sad that an entire generation was lost in the process. If there is anything good about Communism.....It is that it cannot survive forever. Someday I will see the place where my father lived .....and died while visiting his family for the first time 36 years. They tell me his heart was broken when he saw what had become of his homeland. Don't tell me I don't know Cuba......I know it all to well.
Whatever was or is engraved in their memories still is a snapshot. Perhaps you need to search the meaning of the word. Your family as many others have a bad memory, mine has 3 killed in combat against Castro, but Cuba has changed afterwards, you don't know the current Cuba, you stubbornly think you do.
Welcome to the REAL world Cuba. :)
Welcome to the world of free trade and capitalism, my Cuban brothers and sisters. We will save you from godless communism .... just fork over the dough.
Taxes can be paid in a variety of ways. Make no mistake, the Cubans were taxed. The taxes simply weren't acknowledged by the government. The government simply took all the income of the country, and doled out money and services based on its' own criteria.
When you permit private enterprise, the government needs to obtain funds through taxes. This is yet another admission that the government is not a good venue for running the economy. Virtually every planned economy in the world has reverted to private enterprise.
One benefit to the previous Cuban approach - no tax preparers, no agonizing over arcane forms, no prosecution for cheating, etc.
It's too bad that NBC reporters seem to be so economically illiterate.
I agree.
And in addition, when the government seized all the real money in the island, it created a system of "tokens" aka post Castro Cuban currency, which was good solely for inside-the island-trades. This was the system of payment for services for many decades, obsolete outside Cuba.
Has a familiar ring to it.
"Paternalistic Government"??? Now you are making crap up NBC.......Just call it what it is........A Communistic failure !! After 50 + years of suffering and hardship.
If the average worker makes 5400 pesos annually, the income tax scale doesn't start until you earn 10,000 pesos?
Who can afford to complain.
The GOP should step in and complain about this AND recommend that the U.S. become a Communist nation with no taxes.
The Democrats are doomed if voting ever requires any kind of an IQ evaluation.
Willard is a sore winner. Guys won the election and they're still whining.
Wow even Cuba passed comprehensive tax reforms before us.
You must first earn an income in order to pay taxes. The majority of the island is unemployed and those whom work make so little they can barely survive. Only those that are involved with the communist government get perks. Not necessarily more income.
What a joke.
However, all Cubans that arrive on our soil get food stamps for 6 months ($250/mo each). They can also qualify for Medicaid and have never worked or contributed to any benefits in our country.
Cuba is as much of an anachronism as many conservative, rural parts of the U.S. are. They are both stuck in the Cold War mindset, they make no money, they stick to extreme views on nationalism and citizenship and they boast a lot over labor ethic-related values while relying heavy on government handouts and subsidies. Same sh!t, different stick.
Pure democracy without all the distractions like freedom, liberty, rights, justice and faith: taxes.
They are moving away from this form of government.....We are unfortunately are moving towards it!
Because we cannot see the forest for the trees.....and critical thinking is no longer truly part of the curriculum in our schools. Just mindless testing and reprogramming.
Really? You mean like the SS and medicare YOUR parents are getting for free? Or the free healthcare and pensions for military retirees? Or that subsidized health insurance you enjoy from your employer...you don't know what socialism is...I'll tell you
When I have to pay for benefits I don't get...that is socialism to me
Rick ...How do you figure. Americans have invested in SS......It's not free and it's is not their fault that our Federal Government has squandered it. As for our veterans ....I will gladly pay my share for the sacrifices they have made. There is a HUGE difference ...
Rick, are you truly stupid enough to think that our parents haven't paid into Social Security for their entire lives? They aren't getting things they didn't put in you dumbass
Social security recipients receive money from the taxes that I pay now. That's how it works, there is no "savings account." Some people live long lives and collect far more than they ever paid in, and some people die prematurely and neither they nor their families ever see a cent of the money they paid into Social Security. It is also possible to collect social security disability benefits before retirement age if a person is unable to work. Ditto with Medicare's need-based cousin, Medicaid. It is absurd to deny that Social Security, one of the largest parts of FDR's New Deal which changed America forever, is a socialist program.
PValdes
When we paid SS through our whole lives into a collective account from which we'll get a small fraction back (if we are lucky) I wouldn't call that an "investment" but it is definitely an investment when in a "collective" sense. The same reason why is not "free" is that we paid for it.
lilirocks .....No doubt it is crappy investment.
Freedom isn't FREE!
They still dont have freedom-- just taxes.
Hope the cuban economy gets better, as I've a '65 Chevy Impala in mint condition that'll be looking good on the island.
IF big if ...If Cuba implement's these reforms in a responsible manner..they could very well end up being the TOP economy in the Caribbean...
or North America.
Here is a link explaining how the embargo crushes the Cuban economy and how it penalizes countries with million dollar fines for doing business with Cuba.
Here is how the embargo crushes the Cuban economy. It makes it difficult for other countries to do business with Cuba, imposing million dollar fines on those who don't subject themselves to this dictate.
since 1992 and the adoption of the Torricelli Act, these sanctions apply equally to third countries that might wish to trade with Cuba. This constitutes a serious violation of international law which prohibits any national legislation from being extraterritorial, that is to say, from being applied outside of national boundaries. For example, French law cannot be applied in Spain and Italian law cannot be applied in France. Nonetheless, United States economic sanctions remain applicable to all countries that trade with Cuba.
Thus, any foreign ship that docks in a Cuban port finds itself forbidden to enter U.S. ports for a period of six months. Cuba, being an island, is heavily dependent upon maritime transport. Of the commercial fleets that operate in the Florida Straits, most conduct the bulk of their activities with a clear understanding of the importance of this market and do not run the risk of transporting merchandise to Cuba. When they do, however, they demand a higher tariff than that applied to neighboring countries, such as Haiti or the Dominican Republic, this in order to make up for the shortfall that results from being banned from U.S. ports for having done so. Therefore, if the standard price for transporting merchandise to the Dominican Republic is 100, this figure that can rise to 600 or 700 for Cuba.
CSF: You also comment on the retroactive nature of the economic sanctions.
SL: Since the adoption of the Helms-Burton Act in 1996, all foreign enterprises that wish to invest in Cuban property that had been nationalized in 1959 risk prosecution in the United States and seeing its U.S. investments frozen. This law is a judicial aberration because it is both extraterritorial and retroactive -- in other words, it applies to events that occurred before the law was adopted, something that is contrary to international law. Take the case of the anti-tobacco law in France. This law was promulgated on January 1, 2008. But if you smoked in a restaurant on December 31, 2007, you would not be prosecuted, because the law cannot be applied retroactively. The Helms-Burton Act applies to events that occurred during the 1960s, something that is clearly illegal.
CSF: The United States maintains that the economic sanctions are a simple bilateral question that does not concern the rest of the world.
SL: The example that I have already cited demonstrate the exact opposite. I'll give you another. In order to sell on the U.S. market, a German, Korean, or Japanese automobile manufacturer -- in reality the nationality matters little -- is obliged to demonstrate to the U.S. Treasury Department that its products do not contain a single gram of Cuban nickel. It is the same for all of the agribusiness enterprises that wish to invest in the U.S. market. Danone, for example, must demonstrate that its products contain absolutely no Cuban raw materials. Cuba cannot sell its natural resources and its products to the United States, but in these exact cases, neither can it sell them to Germany, Korea, or Japan. These measures deprive the Cuban economy of much needed capital and Cuban exports of many markets around the world.
CSF: The economic sanctions have also had an impact on healthcare.
SL: Indeed, nearly 80% of all patents applied for in the medical sector belong to U.S.-based multinational pharmaceutical companies and their subsidiaries, which puts them in the position of being a quasi-monopoly. It should be noted that international humanitarian law forbids all restrictions on the freedom of movement of foodstuffs and medicines, even during wartime. And officially, the United States is not at war with Cuba.
Here is a clear example: Cuban children could benefit from the Amplatzer septal occluder, a cardiac plug manufactured in the United States that allows one to bypass open heart surgery. Dozens of children are waiting for this operation. In 2010 alone, four were added to this list: Maria Fernanda Vidal, five years old; Cyntia Soto Aponte, three years old; Mayuli Pérez Ulboa, eight years old; and Lianet D. Alvarez, five years old.
Personally, I think the embargo is stupid. I'm sure it will end soon, and I'll have my vacation there the year it does, while everything is still cheap!
Gee, considering many countries, such as Canada, Spain, the Netherlands, China, all trade freely with Cuba, I guess your source is wrong.
OMG what happened to the Cuban workers paradise? Obama will be devastated.
We need to annex Cuba and make them a state. I hear they have really excellent scuba diving there and I'd like to try it without having to go through Gitmo.
First we need to annex Quebec. Their "poutine" (imagine the taste of fried mash potatoes and gravy) will give us strength!
Pith,
Sorry, but Ontario is our state #53. Cuba is #51 and we can do it by this Christmas is we just simply ignore all the fiscal cliff cra[ppola. Then, Puerto Rico is # 52, next summer.
I am now wondering if my dad's fried mash potato recipe came from Montreal, where he unloaded grain. Simply add a bit of onion, fry - add salt and serve. Gravy sounds like some mess from the USA southeast region.
I had thought the recipe came out of our 1930's depression years and before microwave zappers.
What does Grover Norquist think about this?
Too cool, even the old communist dictator needs to find a way to rape more cash from the hands of his impoverished people out trying to sling a buck on the side. Terrific. New book, Lessons learned from Obama.
People .....just take a look at the slide show. Look at the dilapidated infrastructure.....That will tell you all you need to know about socialism. Is that what you "progressives" want for America?
PValdes They also have rebuilt and new infrastructure, but you won't try to find those. What you can do is to watch a History Channel TV show about our dilapidated highways, sewage, bridges (like the one that collapsed no long ago in Minnesota), levees and dams. You should watch that slide show and shut up.
http://www.ritholtz.com/blog/2009/10/crumbling-of-americas-infrastructure/
And here we will soon start taxing welfare, unemployment, disability, social security, and food stamps. Thats the way socialism and communism works. Cant beg, borrow, or steal it anymore you gotta just recirculate it down to nothing.
Can you imagine what would happen if the US were to open up access to Cuba?
The wealth and industry from the US would be unbelievable. Cuba would become a financial mecca over night.
Any development in Cuba would give the US government severe chest pains.
I am sure the people are thrilled poverty and taxes sounds like our gringo operated goverment
Strange. Cuba is getting more like us and Obama is taking us to more like Cuba.