Top-paid Cubans protest new income tax law
Thu 31 Jan 2008, 20:01 GMT
By Anthony Boadle
HAVANA (Reuters) – Cubans working for foreign companies and embassies
are expressing anger at a recent government decision to make them pay
income tax on their hard currency bonuses.
After four decades of tax-free communist rule, the prospect comes as
shock. Since 1996, only artists, writers and self-employed Cubans have
paid income tax.
A circular distributed this week by Cubalse, the state employment agency
that provides embassies with staff, postponed a deadline for registering
at the tax office by one month until April 1.
The delay came in response to a rare outburst of dissent at a meeting
two weeks ago of the Acorec employment agency where card-carrying
Communists who work for foreign companies expressed opposition to the
A video of the meeting seen by Reuters showed workers winning applause
by demanding that the government first legalize hard currency salaries
before taxing their earnings.
"We know taxes exist in other countries. What bothers us is the way they
imposed this tax," said an employee of a foreign company who asked not
to be named. "It's a political problem. They want everyone to be equal,
equally screwed," she said.
Foreign companies cannot hire workers directly but go through two state
agencies which pocket the hard currency and pay the workers in local
pesos, worth 24 times less.
Most companies pay their employees under-the-table salaries that are not
legally allowed but tolerated under the euphemism of "gratificaciones"
The proposed tax, ranging from 10 to 50 percent, is aimed at about 5,000
Cubans, among the best-paid people in a country where the average
monthly wage is $15.
Cuba watchers saw the new tax as a break with the principle of an
egalitarian society upheld by Cuban leader Fidel Castro since his 1959
They said it could point to more steps to raise economic performance
under acting President Raul Castro, who took over from his ailing
brother 18 months ago.
Foreign companies, which have faced criticism for paying "slave wages"
in Cuba, welcomed the government decision because it allows them to
legally pay their employees real salaries.
"With this tax, the government is recognizing that some Cubans can earn
much more than others. That's a big step," said an executive of a
foreign multinational company.
Phil Peters, a Cuba expert at the Lexington Institute think tank in
Northern Virginia, said the "hyper egalitarian" Fidel Castro would never
have taken such a step.
"It signals acceptance of incentives and higher earnings for workers in
sectors of the economy that produce results," Peters said.
Extended to other areas of the economy, it would mean more incentives
and opportunities that should improve output and productivity which
would be "positive for Cuba's economic health," he said. (Editing by