Economy & Trade, Headlines, Labour, Latin America & the Caribbean

CUBA: Socialism Needs More Taxes, Fewer Subsidies

Patricia Grogg

HAVANA, Dec 20 2010 (IPS) - Cubans are delving deeper into economic change, which means new taxes and an end to the state subsidies that for decades were a symbol of the equality so highly extolled under the Cuban Revolution.

“Times are coming that could be traumatic for the population,” said a former activist of the governing Communist Party of Cuba (PCC), who closely followed the delayed television broadcast of parliamentary sessions about reforms to be debated at the next party congress.

The former member of the PCC rank and file agrees with the official line that there are no alternatives to the changes that the Raúl Castro government is applying and will continue to implement as part of a broad modernisation of the economic model. “But I’m worried that the citizens can’t see the horizon clearly,” the source, who asked not to be identified, told IPS.

The four days of parliamentary sessions ended Saturday with a critical speech from President Castro, who again stressed that the changes under way are irreversible and are intended to reinforce socialism on this Caribbean island. Furthermore, he recognised that mistakes were made in the last five decades that now have to be remedied.

“Either we make corrections or we have run out of time to continue at the edge of the precipice, and we will sink ourselves, and we will sink… the efforts of entire generations,” said the president, who also warned that his hand would not tremble in dealing with functionaries at any level of government who fail to carry out their duties.

Castro said there will be greater demands and new disciplinary measures for handling “transgressions” of the established economic policy line. He added that it is better for those who feel incapable of meeting their responsibilities to submit their resignations before they are dismissed from their posts.

Due to the poor performance of state officials and productive deficiencies, Cuba lost an estimated 120 million dollars in missed opportunities in nickel exports, and 65 million in sugar exports — for similar reasons.

But the biggest source of worry among Cuban families remains the possibility of lost jobs, as more than one million positions are to be slashed from the government sector. Furthermore, the decades-old system of food rations is coming to an end.

Although the ration books do not meet the monthly household needs of most families, many still see them as the only sure and orderly way of obtaining basic goods at low prices. Thanks to the government subsidies, accessible pricing has reigned for set quantities of rice, sugar, cooking oil, grains, eggs and some types of meat.

“I agree, it’s insufficient, but it assures me that minimum. They took potatoes out of the ration book and immediately it became difficult to buy them. Dry peas disappeared. You can’t get them anywhere,” retired professor María Caridad Rivera complained to IPS.

Castro admitted that this is a delicate problem, but criticised the fact that the ration book continues to be seen as “a social achievement that should never be abolished,” because today it is a symbol of “egalitarianism,” benefitting even those who don’t need it, whether they work or not.

“In the future, subsidies will exist, not for products but for the Cuban men and women who for one reason or another need them,” announced the president, reiterating that in both phasing out the ration books and cutting the government’s “bulky” payrolls, nobody will be left unprotected.

According to Economy and Planning Minister Marino Murillo, maintaining the basic food basket through the ration system costs the Cuban government just over 1 billion dollars annually, but the current average income does not allow for it to be abolished overnight. “It will have to be eliminated gradually, since we cannot make a radical transformation,” he said.

In terms of employment, the government hopes that some 250,000 people will join the ranks of more than 143,000 self-employed workers in 2011. To that end, a tax system is being implemented that is aimed at giving them a boost — though some economists consider it excessive while not doing much for stimulating the sector, especially in the early years.

Another portion of the “surplus” state employees will be shifted to areas where workers are needed, or could be incorporated into the farming or construction sectors, which both suffer labour deficits. The “readjustment” of the government payrolls means cutting a half-million positions in the first quarter of 2011 alone.

Taxes on private work include rates of 25 to 50 percent on income, 10 percent on sales or services, 25 percent for hiring workers, and 25 percent for contributions to the social security system.

Finance and Pricing Minister Lina Pedraza said they are working on tax legislation to gradually tax salaries, housing, public services and idle land. They will also consider a special tax for people who don’t work, despite being capable, but who make use of social benefits.

The 6th Congress of the PCC will be held Apr. 16-19, 2011, preceded by public debates through February about the economic and social development strategies to be adopted, Castro said.

The 78-year-old president stressed that “because of the law of life,” the congress will be the last for the majority of the “historic generation” that led this island nation since the triumph of the Cuban Revolution in January 1959.

“The time we have left is short. We have the obligation to use the weight of moral authority we have with the people to leave the route plotted out… and we have the elemental duty to correct the mistakes we have made in these five decades of constructing socialism,” said Raúl Castro.