Business

Cuba to impose steep import tax increase

Wednesday, July 18, 2012    

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HAVANA, Cuba - 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 US$10 a kilogram (US$4.50 a pound) or more for imports, a fortune in a country where salaries average the equivalent of about US$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 US$0.50 a kilo (US$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 yesterday'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, colourful blouses and children's clothing, and who had heard rumours 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 legalisation of a real estate and used car market, the granting of licences 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.

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