Cuba decrees steep increase for import tax


Andrea Rodriguez, The Associated Press


HAVANA—Cuba has announced the imposition of stiff new import taxes that could substantially affect private entrepreneurs trying to get new businesses off the ground and many others who rely on informal shipments of merchandise from overseas.


Starting in September, Cubans who come in and out of the country more than once a year will have to pay the equivalent of $10 a kilogram ($4.50 a pound) or more for imports, a fortune in a country where salaries average the equivalent of about $20 a month. Non-Cuban residents of the island, as well as Cuban-Americans visiting relatives, would have to pay the new rates even if they only make one trip to the island.


About a quarter of a million Cubans have started new businesses under free-market reforms instituted by President Raul Castro at the end of 2010. Many have opened cafes, repair shops, clothing stalls and outdoor stands that rely on products brought in from abroad.


Cubans with permission to travel often fund their trips by acting as mules, coming back with bags stuffed with clothes, electronic goods, diapers and other things that are hard to find on the island. Until now, they would pay only about $0.50 a kilo ($0.25 a pound) in import duties, with set fees for big-ticket items like televisions and microwave ovens. Food imports were free until earlier this year, when the government began charging duties.


The new fees were posted quietly on the website of the government's Official Gazette and are dated July 2.


State-run newspapers have carried no mention of the change, nor did Tuesday's midday television newscast. But a website of the official Radio Rebelde station ran a short article Tuesday morning, and a vague mention of discussions about import taxes was made on a late-night newscast.


The Radio Rebelde article is headlined "New banking and import resolutions improve services at Cuban airports," with no discussion of the effect the duties will have on private business.


Some details of the new law were confusing, given that the decree was published in dense legalese and appeared to contradict itself, and that no government officials were available to make sense of it. At times the decree refers to taxes being imposed based on weight, and at times on the value of merchandise.


Either way, it was clear to private business owners that they would be paying much more, and they were not happy about it.


"It's a disaster," said Luis Carlos Espinosa, a 42-year-old who has set up a small stand in Central Havana selling jeans, colorful blouses and children's clothing, and who had heard rumors of the new taxes but had not yet seen the published law. "It hurts us in every way. Where are we going to get the merchandise? There is no wholesale market here."


Several other street vendors who refused to give their names for fear they could get into trouble said they were angry that the government had not discussed the changes with private business owners before making them law, and that details were still sketchy.


Castro has ushered in dramatic changes like the legalization of a real estate and used car market, the granting of licenses for 181 types of private sector jobs, micro-loans for small business owners, the loosening of rules limiting independent restaurants, and a program to turn fallow government land over to small time farmers.


Paolo Spadoni, a professor of Political Science at Georgia's Augusta State University, said that the flurry of new laws have left little doubt in Cubans' minds that the reforms are here to stay, unlike a past experiment with limited capitalism in the 1990s.


"There has been no backtracking since Raul Castro became president," he said. "It seems clear that each measure is carefully planned and that they are trying to implement measures that can be sustained over time.


But the momentum has undoubtedly waned this year, with no major reforms announced since December. Two promised high-profile changes, the creation of mid-sized cooperative businesses and the elimination of travel restrictions that keep most Cubans from leaving the island, have yet to materialize, despite repeated assurances they are in the works.


The reforms are part of a five-year plan to shed a million state workers and turn more than 40 percent of the economy over to the private sector, compared to about 15 percent today. While they began in earnest in 2010, Cuban officials say the clock started ticking on January 1, 2011, giving the government 3 1/2 more years to complete the transformation.


Some feel they are not going fast enough, especially given the fact that Castro and his top deputies are all over 80, and Cuba could lose a generous ally in Venezuelan President Hugo Chavez, who is ailing with cancer and campaigning for re-election this Fall.


"If you just look at what they keep talking about, displacing all these people to the private sector, at the rate they're going it's not going to happen," said Sergio Diaz-Briquets, a Cuba analyst based in the Washington area.


"They're continuing to do it in a very methodical way, but too slow," Diaz-Briquets said. "From what we all can see, it's not fitting with the targets they have set for themselves several times already."



Associated Press reporters Paul Haven and Peter Orsi contributed to this report.



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