Thursday, December 16, 2010

Minister: 1.8 million to join “non-state” sector by 2015

Cuba’s National Assembly is meeting and yesterday heard the annual year-end presentation by economy minister Marino Murillo (Reuters story here based on the televised portion). Today’s Granma runs a long transcript of part of the session including Murillo’s remarks, some Q&A, then the remarks of finance minister Lina Pedraza, wherein she previews soon-to-be-released proposals to change Cuba’s tax system.

The headline reads: “2010 economic results and proposed plan for 2011. Updating of tax policy.”

With all due respect, I think Minister Pedraza deserved the headline.

She started with a discussion of Cuba’s current tax law and tax policy, on the need for Cubans in general to understand the role of taxation in sustaining social services, and on the tax-related elements in the policy guidelines that were published recently in advance of next year’s Communist Party Congress.

As a preamble to her explanation of the new tax proposal, Pedraza lets on that “by 2015 approximately 1,800,000 people will join the non-state sector in new forms of management [gestiĆ³n].”

As for the proposal itself, these are elements under discussion:

  • Taxation of private farmers.

  • Application of sales taxes in state enterprises for wholesale and retail transactions, and a specific tax to be paid by hard-currency stores.

  • A value-added tax has been considered and ruled out for now.

  • Reduction in taxes paid per employee by businesses.

  • Expanding the use of dedicated taxes to finance environmental protection projects.

  • Directing greater amounts of tax revenue to local governments.

  • In the future, taxation of state-sector salaries.

  • Taxes on residential property “una vez que se flexibilicen las formas de transmisiĆ³n,” which sounds like yet another hint that property sales may be permitted.

  • A special tax on people who are able to work and do not work, as a contribution in consideration of social benefits that the government provides.

Finally, Pedraza cites the need for a new tax law to encompass all the changes.

There is a lot more in her remarks – especially about the thinking behind current and future tax policies – much more than I reflect here, and they are worth reading for yourself.

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