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Latino Daily News

Tuesday January 1, 2013

Cuba’s New Tax Law Takes Effect - Intended to Improve “Economic Conditions”

Cuba’s New Tax Law Takes Effect - Intended to Improve “Economic Conditions”

Photo: Cuba's New Tax Law Takes Effect - Intended to Improve "Economic Conditions"

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Cuba enacted this Jan. 1 a new Tax Law to continue the government’s “modernization” of socialism with economic reforms that revamp the tax culture of a country where taxes have been virtually non-existent since the 1959 Cuban Revolution.

The new tax code approved in July by the National Assembly updates the tax system that has been in force since 1994 to bring it more in line with current international trends, which authorities describe as more “comprehensive” and “flexible.”

In general, the law is a guide for a tax system that is to be applied gradually to finance the transformations that President Raul Castro is promoting in the Cuban economy, and which have created new opportunities in the private sector over the past two years.

The law contains 19 taxes, three contributions and an equal number of fees, but not all these charges will be effective this year and are subject to changes according to the nation’s “economic conditions,” as in the case of income and real estate taxes.

The list includes taxes in support of social security and local development derived from personal income, profits, use of work forces, land transport, advertising and customs.

Postponed during 2013, among other categories, are taxes on goods and services in the retail network, for the use of beaches and inland waters, and on agricultural properties.

A “special regime” has been established for the agricultural sector with tax benefits that reduce its tax rate by as much as 50 percent compared with other economic sectors, in order to stimulate food production, a matter of “national security” for the state, considering the millions of dollars it spends on food imports.

Those who are granted the use of idle lands for farming, which at the end of the year were more than 170,000 people, are exonerated for two years from paying at least three taxes that are obligatory for other self-employed workers.

For the purpose of promoting all kinds of private-sector work, whoever takes up self-employment will not pay a series of taxes related to their chosen activity for some three months, after which a progressive scale will be applied according to income.

Unlike what happened in 1994 when ex-President Fidel Castro introduced taxes as a kind of sanction on enrichment in the emerging private sector, Raul Castro has said that this is “a fundamental instrument of the nation’s economic policy.”

The vice president and coordinator of the current economic reforms, Marino Murillo, has insisted that “everyone has to pay taxes,” even though Cubans are not used to doing so.

For decades taxes were practically done away with and Cubans lived in a socialist country without a tax culture, so that now confusion and controversy have arisen over taxes and about what might be coming next.

The government says the new tax code will help pay for social programs and will ensure that fiscal policy is enforced.