The National Assembly session: cooperatives, taxes, and more

Here’s a roundup of information coming out of the speeches and coverage of this week’s National Assembly session.

Raul

President Raul Castro spoke mainly about economics, noting stronger-than-anticipated growth (2.1 percent in the first half of 2012), a still-lagging agricultural sector, and a 17 percent increase in sugar production.  The process of “reordering” debt is contributing to a “gradual but sustained rescue of the credibility of the Cuban economy,” he said.

He said that following a large pilot program in the creation of non-farm cooperatives (more below), a new law governing these cooperatives will be developed.

As for the pace of reform, he held to his often-expressed conviction that the pace is right, steady but not rushed, proceeding with “decision, serenity, and audacity.”  He noted that many outside Cuba, “not always with good intentions,” call for more rapid action.  He told delegates that it is no accident that he and others refer to the lineamientos by number as they discuss their implementation; the idea is to reinforce the commitment to implement them and “not to permit that transcendental decisions for the future of the nation end up once again as a dead letter.”

His words on migration policy surely disappointed.  Rather than announce action on the commitment to loosen restrictions on Cubans traveling abroad, he reiterated the commitment to “reformulate” current norms and “proceed to their gradual application, taking into account their associated effects and the international situation.”

The National Assembly elected a new vice president, Ana Maria Mari Machado, a lawyer and supreme court judge.  She replaces veteran Jaime Crombet, who resigned for health reasons.  Raul Castro gave Crombet a fond sendoff and said he expects Crombet to work directly with him on modifications to Cuba’s constitution.

Cooperatives

Economic reform czar Marino Murillo explained that a large-scale trial run will begin later this year in the conversion of state businesses into private non-farm cooperatives (Granma, Trabajadores). 

Notwithstanding the contributions made by the greatly expanded small entrepreneur sector, this is the initiative that must succeed in order to meet targets for reducing state sector employment and expanding the private sector.  Cuba has long had cooperatives in the farm sector; what’s new here is the application of that formula to other areas of production.  The details, as presented by Murillo:

·         About 200 businesses have been selected, almost half of which are farmers markets.

·         The legal norms are nearly finished, after which the pilot projects will begin.

·         Some will start before year’s end, the rest will follow in 2013.

·         Land and buildings will remain state property and be rented to the cooperatives for up to 10 years.

·         The 2013 economic plan “foresees” providing $100 million in credits to support these cooperatives.

Taxes

The new tax law, approved but not yet published, was explained by deputy Osvaldo Martinez.  (Granma story here, and the finance minister’s preview of the law in late 2010 is here.)

Martinez said the law’s objectives, beyond generating revenue, are to encourage activities that “contribute to socio-economic development” and to discourage those that do not, and to redistribute income to those in need.

Income tax will be levied on state sector salaries in the future, but not as long as “current economic conditions” exist.

There is a slight tax rate reduction for entrepreneurs, between three and seven percent for those in the three lowest brackets.

Agricultural producers will pay income tax, but at rates 50 percent lower than those applied to other sectors.  Farmers who receive parcels of land from the state will be exempt from income tax, property or tenancy tax, and tax on hired labor for the first two years, and for the first four years if they have had to spend time clearing the land of plants such as marabu.

Property taxes applied to housing and vacant land will not go into effect until current economic conditions change and until property registries are updated.

The tax that entrepreneurs pay for each worker they hire will be reduced over the course of five years from the current 25 percent rate to 5 percent.  The tax will continue to be suspended altogether for those who employ fewer than six workers.

A series of taxes aimed at protecting the environment and natural resources will go into effect for the use of beaches and bays, the right to use underground waters and forest resources, and for other activities.

State enterprises

Reuters describes a loosening of controls on state enterprises as follows:

Murillo, in a two-hour presentation to the National Assembly, announced that an unspecified number of state companies would be partially deregulated by the end of the year.

He said the companies, previously part of various ministries, would be able to make day-to-day business decisions without waiting for government approval, manage their labor relations and set prices. After meeting state contracts, they will also be able to sell excess production on the open market.

The companies will be self-financed, including through bank credits, and expected to cover their losses, versus handing over all profit to the state and receiving financing and subsidies from the treasury.

Instead of being micro-managed by the ministries, Murillo said the companies would be evaluated by “four or five indicators” such as earnings, the relation of productivity to salaries and their ability to meet the terms of state contracts.

Here are additional stories from AP and EFE.