Cuba Lines for Self-Employment Rules

Patricia Grogg

Havana street.

HAVANA TIMES, Oct 26 (IPS) — “They brought me 100 copies, which sold out in less than half an hour,” the vendor at one of the Cuban government’s newsstands told IPS, referring to the nearly 100 pages of regulations published in the government gazette. The people queuing up “just about drove me crazy,” he added.

The new legislation on the expansion of self-employment, one of the alternatives proposed by the government of Raul Castro as part of a reform to shed half a million public sector jobs by March 2011, officially went into effect with the publication of the two special editions of the gazette Monday.

The greatest interest is centered on the taxes to be paid by people setting up on their own in 178 private activities that will now be permitted.

Several different taxes were created: a personal income tax ranging from 25 to 50 percent, a 10 percent sales tax, social security payments, and a payroll tax amounting to 25 percent of the salary paid to the employee.

Will there be a profit?

“I would like to open a business in my home selling snacks and juice,” a middle-aged woman with her copy of the Gazette under her arm commented to IPS. “But if on top of the cost of the license, the sales tax, and I don’t know what else, I have to buy whatever I need for the business at the prices of the ‘shopin’ (government stores that accept only hard currency), I don’t see where the profit is.”

The new system, which was first announced in mid-September, will expand the activities in which self-employment is allowed. In 2009, more than 140,000 people had licenses to work on their own in Cuba, although many more do so without a permit.

Under the new legislation, small businesses will be able to hire employees other than relatives for the first time, and Cubans — even citizens living abroad — will be able to rent out entire houses, instead of just rooms.

But people who have been involved in private enterprise since it was first authorized in the 1990s are worried about what they see as an increase in taxes to be paid by the self-employed.

Others, who have been working on their own without an official license, could be charged heavy fines if they fail to register in the offices set up for that purpose.

“To rent out a room in my house, I have to pay 331 convertible pesos (357 dollars) a month, including the cost of the permit and other taxes that were gradually added on,” a woman who lives in Havana’s Playa neighborhood told IPS. “Of course I also pay an annual personal income tax.

“Now I have to study this document carefully, and wait for the meeting that we will undoubtedly have with Housing Ministry authorities, to find out what we can expect,” she said.

Rentals and family restaurants

The rental business, along with small private family-run restaurants known as “paladares”, are seen as the most flourishing areas of private enterprise in Cuba, despite the strict regulations to which they are subject.

Commercial art.

The taxes will be paid in Cuban pesos. For the self-employed who do business in convertible pesos or “CUCs”, the current exchange rate in the government exchange houses, where the CUC is worth 24 pesos, will apply.

Preliminary estimates by the government’s working group on taxes indicate that an additional 250,000 self-employed people, or “cuentapropistas”, would represent annual government revenues equivalent to around 45 million dollars as of 2011.

The projection apparently took into account the 80,000 to 100,000 licenses reportedly applied for but denied over the last decade or so.

Caution as domestic market depressed

But some analysts are more cautious, and believe the impact will be modest, especially at the start, due to the country’s complicated economic realities.

The new rules also regulate the situation of workers who lose their jobs in the radical restructuring of employment, which is to include the cutting of 500,000 state jobs by the end of the first quarter of 2011, and another half a million over the following five years.

The government currently employs more than 80 percent of the official workforce in Cuba.

Under the new regulations, the alternatives for people who are laid off from their public sector jobs include relocation to other companies, self-employment, and the allocation of land for them to farm.

Also mentioned are “other forms of employment in the public sector,” although details were not provided. In addition, employees who are made “available” or redundant will be able to apply on their own for relocation to another company or institution, or area of activity.

The government says the restructuring of employment is being carried out in response to the need for bolstering efficiency and labor productivity, which it sees as crucial to raising wages and supporting the “enormous social costs” of the country’s socialist system, which includes universal, free health and education.

The restructuring also aims for at least 80 percent of all workers to be engaged directly in production, services or other activities deemed essential for the development of this Caribbean island nation of 11.2 million people.

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2 thoughts on “Cuba Lines for Self-Employment Rules

  • The Cuban government is trying to breathe life back into the dead horse of state monopoly socialism.

    Unfortunately, dead horses are dead and they ain’t comin’ back. What is needed is a new steed, and that steed is state participatory socialism.

    Under this system private property rights would be reintroduced in order to lay the basis for cooperative corporations on the Mondragon model.

    Under a state participatory system the state would take a significant but non-controlling share of these cooperatives. It would receive its revenues on an automatic, quarterly basis when the employees distribute dividends to themselves. This would eliminate the need for a tax-based government revenue system.

    Taxes are the way that capitalistic states get their revenues. It doesn’t occur to them to take over a significant portion of privately owned capitalist industry and commerce because the capitalists and bankers own this and do not wish to share profits with the state. Solution: Shift the costs of government onto the backs of the working people through endless tax schemes.

    If Cuba should go over to state participatory socialism the productivity of the working classes would go through the roof. The state’s significant share of this dynamic, highly productive model would give the government ample revenues, and leave power in the hands of the leading political party.

    Even more exciting, the example provided to the world of a workable form of socialism would begin a revitalization of the world socialism movement. This might allow transformational parties to arise in other countries and perhaps . . . Well, you know!

  • The present economic situation in Cuba may be untenable — but “reform” which maintains most all power in the State and one Party, in a class society, is anything but truly socialist (which is why we can objectively characterize Cuba as being a ‘stalinist’ state in some large measure). By all means ‘rationalize’ a distorted economy: but do it thru the means of *empowering* the citizenry to make these decisions themselves. Simply laying off 1.000.000 people by ‘command’ methods — and leaving them to essentially flounder about on their own in a new ‘de facto’ capitalist ‘labor market’ — can only honestly be characterized as a further and huge retrogression to capitalist relations of production. Even if “socialism” in Cuba has been more talk than reality to this point, looking *backwards* now for solutions to the ongoing and chronic crisis is simply backwards — i.e. reactionary. Period.

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