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Cuba embraces capitalism
Published in The Saudi Gazette on 28 - 10 - 2010

HAVANA: Potential entrepreneurs lined up outside government offices around the capital on Monday after Cuba made official the grand economic changes it announced last month, raising hopes that eagerly anticipated licenses for the newly self-employed could be issued soon.
The economic overhaul - the most significant undertaken in communist Cuba since the early 1990s - was outlined in nearly 100 pages of rules and regulations for small businesses published in the government Gazette.
The rules published Monday detail four kinds of taxes for the private sector: a sliding personal income tax, a sales tax, a public service tax and a payroll tax. It also establishes minimum monthly fees for different kinds of businesses, as well as deductions Cuban can take to reduce their tax burden.
Some of the tax rules were detailed in the Communist Party newspaper Granma last week, but the newspaper account lacked crucial details and contained several contradictions.
The law establishes 178 private activities for which licenses can be granted - everything from restaurateur to taxi driver, from button maker to party planner. The majority of those businesses will be eligible for a simplified tax system that establishes a monthly quota regardless of revenue.
For instance, parking attendants would pay 80 pesos ($4) a month, while typing instructors would have to fork over 100 pesos ($5) monthly. Barbers have one of the highest fees: 200 pesos ($10) a month.
Those not eligible for the simplified tax system - jobs like taxi driver, plumber and rooming house operator - will pay a 25 percent income tax on the first 10,000 pesos ($476) earned each year, with the rate rising for those who earn more. Income exceeding 50,000 pesos ($2,381) a year will be taxed at 50 percent.
Businesses will also be subject to a 10 percent levy on the total value of their sales, and those that use public services like electricity and water will have to pay a 10 percent tax on top of normal utility rates.
Entrepreneurs who hire employees will have to pay a 25 percent payroll tax on their salaries, and all Cubans who are self-employed must 25 percent of their income into a social security system from which they will eventually draw a pension. The rules mean that, theoretically, a successful businessperson could face taxes of nearly 75 percent, between personal income tax and social security.
But the law also establishes many deductions for raw materials, transportation and other business expenses that make such a high rate unlikely. The new regulations will allow Cubans over the age of 17 to start their own business, so long as they are permanent residents.


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