Cuba Gov. Seeks Taxes, Less Subsidies

Patricia Grogg

Cuban Parliament meeting to discuss economic reforms. Photo: Jorge Luis Baños Hernandez

HAVANA TIMES, Dec 21 (IPS) — Cubans are delving deeper into economic change, which means new taxes and an end to the state subsidies that for decades were a symbol of the equality so highly extolled under the Cuban Revolution.

“Times are coming that could be traumatic for the population,” said a former activist of the governing Communist Party of Cuba (PCC), who closely followed the delayed television broadcast of parliamentary sessions about reforms to be debated at the next party congress.

The former member of the PCC rank and file agrees with the official line that there are no alternatives to the changes that the Raul Castro government is applying and will continue to implement as part of a broad modernization of the economic model. “But I’m worried that the citizens can’t see the horizon clearly,” the source, who asked not to be identified, told IPS.

The four days of parliamentary sessions ended Saturday with a critical speech from President Castro, who again stressed that the changes under way are irreversible and are intended to reinforce socialism on this Caribbean island. Furthermore, he recognized that mistakes were made in the last five decades that now have to be remedied.

See Raul Castro speech to the Cuban parliament

“Either we make corrections or we have run out of time to continue at the edge of the precipice, and we will sink ourselves, and we will sink… the efforts of entire generations,” said the president, who also warned that his hand would not tremble in dealing with functionaries at any level of government who fail to carry out their duties.

Poor performance has caused big losses

Castro said there will be greater demands and new disciplinary measures for handling “transgressions” of the established economic policy line. He added that it is better for those who feel incapable of meeting their responsibilities to submit their resignations before they are dismissed from their posts.

Due to the poor performance of state officials and productive deficiencies, Cuba lost an estimated 120 million dollars in missed opportunities in nickel exports, and 65 million in sugar exports — for similar reasons.

But the biggest source of worry among Cuban families remains the possibility of lost jobs, as more than one million positions are to be slashed from the government sector. Furthermore, the decades-old system of food rations is coming to an end.

Shopping in Havana. Photo: Elio Delgado

Although the ration books do not meet the monthly household needs of most families, many still see them as the only sure and orderly way of obtaining basic goods at low prices. Thanks to the government subsidies, accessible pricing has reigned for set quantities of rice, sugar, cooking oil, grains, eggs and some types of meat.

“I agree, it’s insufficient, but it assures me that minimum. They took potatoes out of the ration book and immediately it became difficult to buy them. Dry peas disappeared. You can’t get them anywhere,” retired professor María Caridad Rivera complained to IPS.

Castro admitted that this is a delicate problem, but criticized the fact that the ration book continues to be seen as “a social achievement that should never be abolished,” because today it is a symbol of “egalitarianism,” benefitting even those who don’t need it, whether they work or not.

“In the future, subsidies will exist, not for products but for the Cuban men and women who for one reason or another need them,” announced the president, reiterating that in both phasing out the ration books and cutting the government’s “bulky” payrolls, nobody will be left unprotected.

Rationing will be gradually eliminated

According to Economy and Planning Minister Marino Murillo, maintaining the basic food basket through the ration system costs the Cuban government just over 1 billion dollars annually, but the current average income does not allow for it to be abolished overnight. “It will have to be eliminated gradually, since we cannot make a radical transformation,” he said.

Shoe repairman. Photo: Elio Delgado

In terms of employment, the government hopes that some 250,000 people will join the ranks of more than 143,000 self-employed workers in 2011. To that end, a tax system is being implemented that is aimed at giving them a boost — though some economists consider it excessive while not doing much for stimulating the sector, especially in the early years.

Another portion of the “surplus” state employees will be shifted to areas where workers are needed, or could be incorporated into the farming or construction sectors, which both suffer labor deficits. The “readjustment” of the government payrolls means cutting a half-million positions in the first quarter of 2011 alone.

Taxes on private work include rates of 25 to 50 percent on income, 10 percent on sales or services, 25 percent for hiring workers, and 25 percent for contributions to the social security system.

Finance and Pricing Minister Lina Pedraza said they are working on tax legislation to gradually tax salaries, housing, public services and idle land.

They will also consider a special tax for people who don’t work, despite being capable, but who make use of social benefits.

The 6th Congress of the PCC will be held Apr. 16-19, 2011, preceded by public debates through February about the economic and social development strategies to be adopted, Castro said.

The 78-year-old president stressed that “because of the law of life,” the congress will be the last for the majority of the “historic generation” that led this island nation since the triumph of the Cuban Revolution in January 1959.

“The time we have left is short. We have the obligation to use the weight of moral authority we have with the people to leave the route plotted out… and we have the elemental duty to correct the mistakes we have made in these five decades of constructing socialism,” said Raul Castro.



2 thoughts on “Cuba Gov. Seeks Taxes, Less Subsidies

  • Hello, I’ve not known much about Cuba but recently I watched a film about Cuban Five after Wikileaks’ cable ‘revelation’ about Michael Moore’s Sicko, and Moore’s retort to it. My gut feeling is that Moore is right, and that coupled with the reports about Cuban Five, it seems to me that Cuba has been grossly misrepresented in the US media …

    I want to learn more about Cuba and this website seems like one of very few good English sources so I am thankful that you keep at it to provide us with balanced information. (I’m trying to improve my Spanish but English articles like this certainly helps me understand things better quicker.) Thanks so much for operating this site.

    The disappearance of ration (even gradual one) sounds like a serious problem for people of Cuba; I hope Cuban people and government will be able to come up with the best way to implement the change.

    Reply
  • How can there be a million people without jobs? Is there any need at all to build roads? railroad systems? Ports? Parks? Sidewalks? Can you abandon the productive capacity of a nation with the stroke of a pen? Those nations who developed, changed their policies according to there needs, and with government help. They stopped focusing in the international arena and look inward to build the necessary infrastructure: (EEUU, China, England, etc). Cuba has a tremendous issues ahead to overcome; First, they do not have a vast mineral, or gas resource to count on, Second, they are not bringing in the foreign capital, nor the know how, Third, they have to encourage their unproductive ruling political elite to minimize its consumption, Fourth, they must stop the neo-colonial practices of exclusion of the black working forces that are qualify to occupy meaningful positions, and are prevented to do so because of their color, affiliation, etc. And most importantly it needs to have at the top a brand of visionary leadership with inspiration that move the masses to a better and more just society. With this current racial situation it can’t, and won’t succeed because they need all the available force to move, and blacks at this moment can’t see a reason why sacrifice for this changes when they are possibly the one most affected with this changes. It is not about races my friends, it is about economics, and to make out of this changes a nation for ALL.

    Reply

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