CUC vs. the Dollar: A Perpetual Tax? / Jeovany Jimenez Vega
Posted on July 11, 2015
Jeovany Jimenez Vega, 31 May 2015 — On Thursday, May 29 Cuba was removed
from the list of state sponsors of terrorism. It had been on the list
since 1982 because of what Washington saw as the Cuban government’s
decades-long history of harboring members of the Basque terrorist group
ETA, Colombian FARC guerrillas and more than one fugitive from American
justice. It had negative implications for Cuba’s dictators in regards to
international banking operations and financial transactions in Cuba. It
had also led to expansion of the U.S. embargo, which even today prevents
Cuba from utilizing dollars in commercial transactions. Those who carry
out such transactions risk confiscation of their assets and/or hefty fines.
Actually, Cuba’s inclusion on the list always struck me as being neither
here nor there. It seemed inconsequential compared to the reality
surrounding us, with the multiple and eloquent examples of what can only
be described — without fear of overstatement — as a policy of domestic
state terrorism: an absolute, blatant and always apparent hostility,
mercilessly perpetrated by Havana’s gerontocracy against anything which
might suggest personal well-being or family prosperity in Cuba.
I believe the Castro government has instituted a long string of
unpopular measures in order to keep the population in a perpetual state
of economic insolvency bordering on destitution. The constant pressure
to put food on table leaves people neither the time nor the inclination
for “dangerous” expressions of civic involvement.
This absurd policy, along with our insulting salaries, means we are
subjected to exorbitant gasoline prices at the pump despite the collapse
of oil on the world market. Be even slightly careless and you are hit
with an electricity tariff. Then there is the outrageous increase in the
price of liquefied gas.
Still in place are the arbitrary exchange rates set by CADECA, the
government currency exchange, the detestable extortions at gunpoint at
airport customs, the constant obstacles with which the private sector
must deal and the obscene exploitation of medical personnel working
overseas by a government acting as pimp. All these measures, decreed
from Havana, make almost any other list of villainies pale in comparison.
This time-honored policy of subjugation has been specifically linked to
this arbitrary tax since 1994 when, from his reverberating loins, Fidel
Castro decided to tie the U.S. dollar to the sacrosanct convertible
Cuban peso, the CUC.
It was a measure which overnight reduced by 20% the purchasing power of
everyone who had for decades been receiving remittances from emigré
family members scattered across all corners of the globe. It has
unquestionably been a lucrative source of income for the island’s
economy for years.
On November 8, 1994 the Central Bank of Cuba issued Resolution 80, which
stipulated that a 10% tax would be applied whenever U.S. dollars are
exchanged for CUCs. Later, in April of 2005, the Committee on Monetary
Policy instituted a further 8% currency exchange fee on the U.S. dollar
and other foreign currencies.
This means that, when changing U.S. dollars in Cuba, there are three
factors to keep in mind: there are the 10% tax stipulated by Resolution
80, the 8% surcharge outlined in Accord no. 15 by the Committee on
Monetary Policy, and the approximately 3.5% commercial fee charged by
CADECA for such transactions. Based on these considerations, you can
calculate that, for every $100 USD you receive, CADECA will give you
But, in a boomerang effect, these decrees carried a hidden cost. In
addition to completely distorting the domestic economic system, they
inevitably had an extremely negative impact on tourism to this
particular spot in the middle of the exotic Caribbean, a region full of
beautiful beaches and better deals which attracted millions of
vacationers disinclined to pay such excessive taxes and fees.
There could be many possible consequences once Cuba is removed from the
blacklist. These days there is one that especially concerns me because
of the immediate and direct impact it could have on families in Cuba. I
ask myself, given the likelihood that Cuba could will be able to conduct
international business transactions in U.S. dollars, which was the
argument used to justify the aforementioned tax, will the Cuban
government now repeal this onerous levy on exchanges involving this
currency and the CUC? Will the military leadership be so shameless as to
retain this blatant method of mass extortion, no matter what, in light
of this fundamental change?
Repeal of this tax is today inextricably linked to the often announced
and often postponed currency unification. Now Cuba’s dictators will have
to weigh two factors. On the one hand there is their undisputed and
regressive commitment to exploiting the Cuban people by any means
possible while promoting anything that leads to financial ruin and
insolvency. On the other hand there is the need, as recommended by
experts on the subject, to rationally coordinate the mechanisms of
Cuba’s economic system in a way that at least appears credible to
international organizations, banks and future investors.
Not doing so would increase the already heightened perception of risk on
the part of more than one businessman, whose sense of intuition prevents
him from relying entirely of the good intentions of Raul Castro. There
have been too many stories of swindles and scams for them to think
But ultimately, if the Cuban government had one iota of shame, it would
immediately repeal this abominable and unpopular tax which has had such
a negative impact on the well-being of the Cuban people. It would stop
treating our poverty like its principal asset, like a disgraceful
pedestal which for more than fifty-six years has served as the
foundation for the longest and most refined dictatorship the Americas
have ever known.
Source: CUC vs. the Dollar: A Perpetual Tax? / Jeovany Jimenez Vega |
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