The End of Freebies by the Revolution / Cubanet, Miriam Celaya
Cubanet, Miriam Celaya, Havana, 7 September 2016 — In recent days, the
Cuban official media announced the implementation of a tax on personal
income for workers in the State's business sector, as well as an
extension of payments called Social Security Special Contribution (CESS)
– that workers at the so-called "perfecting entities" were already
The new measure will take effect on October 1st of this year and will
involve over 1.3 million workers who will "benefit" from the Business
Improvement System (SPE) along with those receiving payments for results
and profits. Such an arrangement "confirms the redistributive function
of tax revenues and allows a decreasing participation of the State
budget in the financing of public expenditure," according to officials
quoted by the official press.
The payment of taxes will be deducted directly from State company
workers' income by the State company, which will forward it to the State
Budget. That is, workers will collect their a salary after deductions
are taken by their State employer for payment to the State.
Contrary to what might happen in a moderately democratic country, where
workers can join together in free trade unions and make demands against
measures that affect their wages and income, in Cuba there have been no
demonstrations, strikes or insubordination in the labor groups affected
by this arrangement. Nor is this expected to occur. Against the grain of
what some imaginative foreign digital media may claim about "over one
million angry workers," to date no event in the Cuban scene justifies
such a headline.
Actually, Cuban State workers, deprived of such a basic right as free
association, have developed in recent decades other peculiar ways of
processing their dissatisfaction with government actions that harm them,
such as being less productive and increasing theft and "diversion" of
resources to round up their depressed wages with additional "profits"
from such diversions; or emigrating to the private sector – which has
been becoming more frequent and expeditious – or permanently leaving the
country to seek prosperity away from the costly "protection" of the
For its part, the Central de Trabajadores de Cuba (CTC, Cuban Workers
Center), the only "union" legally recognized in Cuba, not only has
failed to fulfill the functions it supposedly was created for, and – on
the contrary – is developing a whole strategy of support for the
government, holding meetings at the grassroots level so that union
leaders may enlighten workers about the need to contribute to the State
Budget as a way of contributing to the fabulous social benefits they are
enjoying, especially with regard to health and education.
For this purpose there have been commissioners who, either due to their
lack of mental capacity, out of sheer perversity, or for both reasons,
mention among these "freebies" the public's use of battered highways and
roads, the calamitous sewer system or even the precarious and almost
nonexistent system of streetlights.
However, implementation of the new tax measures should not surprise
anyone. Since the 2011 Sixth Congress of the Cuban Communist Party
(PCC), the Guidelines framed on Fiscal Policy announced that "higher
taxes for higher incomes" (Guideline 57) would be established, and that
the tax system would gradually "advance widely to increase its
effectiveness as an element of redistribution of income."
In that vein, on November 2012, Law 113 (of the Tax System) was
approved, repealing Law 73 of August 1994, establishing a special
provision that reads: "Personal Income tax on salaries and other
qualifying income, in accordance with the special rules and Property Tax
on Housing and vacant lots to Cuban-born citizens and foreign
individuals permanently residing in the national territory, will be
required, if economic and social conditions warrant its implementation,
which will be approved by the Budget Act of the corresponding year."
In April 2016, the VII Congress of the PCC once again took up the issue
of the need for the population to develop a tax culture, stressed the
inability of the State to continue assuming the costs of social benefits
and announced that it was studying the implementation of a system of
personal income tax… when suitable conditions existed.
In light of today, it becomes obvious that these "conditions" did not
refer specifically to an increase in workers' purchasing power, which is
still insufficient despite the much vaunted 54% increase in the average
wage in the State business sector from 2013 to the present, which places
the wage at 779 Cuban pesos (about US $31) according to official
figures. Rather the "conditions" are the State's increasing inability to
ensure the already deficient social security by itself, plus the budget
deficit, which the government's own media places at 1.2 billion Cuban
pesos, which must be covered by the treasury.
As officially reported, the State budget for 2016 is 52.4 billion Cuban
pesos, of which 5.7 billion (more than 10% of the total budget) went to
Hence Resolution #261 of 2 August 2016, by the Ministry of Finance and
Prices, which sets out in detail the tax rate aimed at complementing Law
113 of the Tax System. This should have been applied starting in the
second half of the year, but – apparently – nothing could be allowed to
mar the Ex-Undefeated One's 90th birthday celebration in August, so,
during the last regular session of the National Assembly of People's
Power it was agreed to postpone the implementation of the resolution
until the fourth quarter, starting with September's income.
Of course, in a "normal" society, an increase in social benefits
coincides with a rigorous compliance with a realistic tax policy. The
problem is that Cuba does not have either of these two premises: it is
neither a "normal" country nor does it have a "realistic" tax burden,
but quite the opposite.
In fact, Cuba's own laws demonize prosperity, limit and discourage
production capacity, and discourage and penalize the "accumulation of
wealth." At the same time, there is colossal inflation and a deviant
monetary duality: the country operates with two currencies, the Cuban
peso (CUP) and the so-called Cuban convertible peso (CUC). For the most
part wages are paid in the first currency, while a large portion of the
necessities of daily life are sold only in the second. With an exchange
rate of 25 Cuban pesos for 1 CUC, this creates an unbridgeable gap
between Cubans with access to hard currency, CUCs, and the always
insufficient living wage in national currency, CUPs, creating a
distortion between official projections, real wages and workers' cost of
Other accompanying factors to the tax culture of a nation, not reflected
so far in the government's plans, are the economic freedoms of those who
produce the wealth – the taxpayers – and a necessary transparency in
financial figures. Both the source of funds of the State Budget and the
destiny of the revenue that feeds State funds through fiscal policy are
occult matters of science, under the management of only a small group of
There are certain benefits of collateral privileges for some sectors,
which are also not in the public domain. For example, the population
does not know what percentage of the national budget is allocated to the
cost of the Revolutionary Armed Forces (FAR) and the Ministry of the
Interior (MININT), although both ministries were the first to apply the
SPE, while their employees enjoy higher wages, as well as prioritized
plans for housing construction and free or irrationally cheap vacations
at resorts with prices that are prohibitive for the pockets of common
workers. They also get guaranteed transportation services, the largest
motor home park in the country, preferential access to food products and
a long list of freebies.
In addition, there has been no information on the relationship between
the tax and the pensions that retirees get. That is, how many State
workers should pay taxes to cover the pensions of all retirees, and what
are the projections in this direction for a population that is aging at
an alarming rate, and that is, in addition, being hit by the growing and
constant exodus abroad of its labor force.
At the moment, workers – suddenly converted to taxpayers without
economic rights – have not been liberated of their patriotic obligations
such as the "donation" of a day's pay for the National Militias Troops,
a shell entity which nobody sees or belongs to, but with a fixed quota,
or of the union fees for an association whose primary function is to
defend management. Cuckolded and beaten.
What is uncontested is the efficiency of the State in sharpening its
pencils and doing its math. It is known that 1736 State-owned businesses
have average salaries in excess of 500 Cuban pesos at which the tax goes
into effect; therefore, their workers will begin to take on the new tax
burden that will make their incomes dwindle. The bad news is that,
presumably, many State workers will give up their jobs to look more
promising ones elsewhere. The good news is that Daddy State will stop
bragging about so many expensive freebies.
The "gains" made by the workers through half a century of "Revolution"
are quickly blurring.
Translated by Norma Whiting
Source: The End of Freebies by the Revolution / Cubanet, Miriam Celaya –
Translating Cuba -