Cuba's tax lessons

It is a process that fills many in the capitalist world with dread every year. Now, for the first time, many in Communist-run Cuba are facing the same chore: filing a tax return.

It is more than a year since the government increased the number of licences available for privately-run business on the island. In Havana, myriad DVD dealers and watch repairers, fritter sellers and cafes now jostle for custom on the roadside.

Cuba's new entrepreneurs are free to earn more than the small state salary most workers take home of under $20 (£13) a month. But unlike state employees, they now have to pay taxes.

"It'll take a bit of work for people to understand they have to pay," says Maritza Ramos, a housewife-turned-seamstress who sells her colourful creations on a street stall. We haven't had that concept here for years, so it will take a bit of getting used to."

Cuba's revolutionary leaders abolished personal income tax in the late 1960s. It was reinstated in a limited form in the 1990s when the government allowed some private businesses to operate, softening the blow as Soviet subsidies to the island disappeared along with the USSR.

Money counts

Now more than 358,000 people - 9% of the workforce - are registered as cuenta-propistas, or self-employed. In the leafy garden of a Havana tax office, some of them queue to consult an adviser. A noticeboard is covered with cartoons explaining the new system; posters remind first-time payers that they're making a valuable contribution to the state.

"It's all strange," says retired military man Carlos Taquechel, 75.

State pensions do not go far, so he works in a supermarket car park. He and his wife also rent out a room to make ends meet. Mr Taquechel says the difficulty is paying the monthly fixed-rate tax for their business. Income tax is calculated on top.

Recently the couple have been unable to rent out the room, as a previous lodger caused damage that they are still repairing. Even so, they are still having to pay tax, they say.

"The system is new and needs polishing," Mr Taquechel says. "It's like when a child learns to walk. It will fall over many times, but get up again, more experienced. I think we're in that process now."

The government has made some adjustments, though talk of doubling the annual threshold for income tax to 10,000 pesos (£265; $416) has not yet become reality. Currently, more than 90 activities qualify for a "simplified" tax system, a fixed monthly sum regardless of earnings. Palm-tree trimmers are the lowest contributors at 20 pesos a month. Those with higher earning potential, including restaurant-owners and cab drivers, pay sales and income tax on top. There is a sliding scale of up to 50% for earnings over 50,000 pesos a year.

"We needed to update the economic model," says economist Joaquin Infante, who says Cuba is in a "critical" situation.

Give and take

Squeezed by a US trade embargo for five decades, the island was battered by the 2008 financial crisis and multiple, damaging hurricanes in the same year. Cuba still has to fund its system of subsidised products and free universal education and health care.

"The revolution was very paternalistic. So [the reforms] being taken are to see more efficiency, more productivity," Mr Infante says.

"People also have to start paying taxes: contributing to the state, not just receiving."

The government plans to cut tens of thousands of state jobs in the coming years to reduce costs. So Cuba's accountants are bracing themselves. Across the country, they are attending state-run courses in the new tax system.

Many are becoming cuenta propistas themselves: fathoming out other people's tax returns and making payments is now a good business. The classes also teach the ethics of taxation. But that is where one student in Havana spots a hitch. His clients say high taxes risk strangling their businesses.

"Many feel they have to lie about the income they should pay tax on," Yordanis Avila says. "I think for the average Cuban, with his little street cafe, it's too expensive to tell the taxman the truth."

In an economy which functions largely in cash, with few receipts, tax evasion will be hard to tackle. Still, Joaquin Infante estimates the expansion of small businesses has already netted the state 1bn pesos ($400m). It has also brought many workers at least partially out of the shadow economy.

"Seventy-five per cent of the new self-employed were either retired, not working or working illegally before," he says. "Those people are now contributing to the development of the country."

Many businesses have struggled this first year and a quarter have folded. But those who have survived say they are better off now, even with high taxes.

"Of course!" says Maria Julia, a former transport ministry employee who now sells costume jewellery at a street stall.

"I can go a day or even two without a sale and the taxes are high... I'm never going to be a millionaire but there's always money to be made here."

This article was written by Sarah Rainsford for the BBC.

A revolutionary agenda

Operation Miracle

One of the problems frequently highlighted in Cuba - including by the Communist Party newspaper Granma - is that of low productivity. On our recent visit to the island with the Morning Star/Cuba Solidarity Campaign media group one friend told me ruefully: "Cubans have become used to getting everything given to them. In a sense the state has been too paternalistic."

On the one hand one can feel impressed by the somewhat leisurely pace at which work appears to be going on in the country. Tobacco workers at a factory in Pinar del Rio told us for instance that they each had a quota of 100 a day to make, from the original leaf to the finished rolled cigar, but the pace seemed unstressful and the staff were chatting and laughing as they worked.

On another occasion in Havana we stopped to chat to a flour depot worker who was having a break, sitting on a low wall against the pavement. We got talking with him and he soon told us that wages were not enough for him to buy what he wanted in cucs (the Cuban convertible peso). A discussion ensued and we must have talked for a good 20 minutes before a foreman came up and told him to get back to work. I couldn't help thinking that such a long break would not have been permitted in most workplaces in Britain.

That worker's relaxed, unhurried and unworried attitude may seem a good thing to many of us from a humanitarian point of view. But we have to admit it is probably not so good as regards efficiency or productivity. That does however raise a further question - what is a socialist society for if not to provide a comfortable and enjoyable life for all citizens? Should workers have to work at breakneck speed in order to make a living wage? Most workers would say No - working conditions should be pleasant and reasonable.

The problem is that Cuba, despite its socialist system, is still an underdeveloped country. Although the national income is more equitably distributed among the population than in any capitalist country it has to be able to afford the health and social care, education, sports and cultural facilities it provides the population.

Most Cuban people perceive the existence of a dual currency as unfair and corrosive. While at least Cubans are spared the indignity of separate hard currency shops as existed in the Soviet Union, where one could not enter unless one had hard currency, nevertheless many sought-after goods which have to be imported are only available if paid for in cucs.

One cuc is equivalent to 25 pesos. Wages are anything from 250 to 450 pesos a month, so one can see that a pair of trainers costing 50 cucs is pretty expensive. Cubans can trade their pesos for cucs and the flour-depot worker mentioned above told us that he pays 100 pesos (4 cucs) monthly towards buying his own flat, out of a monthly wage of 300 pesos.

The dual currency is a measure forced on Cuba by economic isolation due to the US blockade. The blockade prevents Cuba importing goods at cheaper rates and the US sabotages food import deals with other countries by stepping in and offering third countries more for the goods than the price already agreed with Cuba. It stops Cuba from importing advanced medicines available only in the US and prevents it from selling its own new home-developed cancer drugs, based on scorpion venom, which have proved effective in trials for certain types of cancer. It bars US citizens from visiting Cuba and it punishes banks and firms in other countries but which also have branches in the US if they try to do business with Cuba.

The blockade continues mercilessly despite the fact that at the United Nations general assembly 186 countries called again for its abolition in 2011. Only the US and Israel backed the embargo, with the tiny island states of Micronesia, the Marshall Islands and Palau abstaining.

The blockade is not merely an expression of US disapproval of the Cuban system. It is an act of war against Cuba intended to stifle the revolution, prevent the country's development and thus cause dissatisfaction among Cuba's citizens. The revolution's continued success will no doubt depend on the extent to which the Cuban Communist Party remains close to the people and is able to interpret what the people want.

The latest measures enacted by law last November allowing citizens to buy and sell their homes and cars suggest that the party is responding to popular demand. Cubans are well educated and have already achieved all the basics - good health care, social care, enough food and cheap, if still inadequate, housing. But it's probably true to say that many Cubans, especially the young, want more consumer goods, cars and better housing.

Cuba's excellence in medicine is well known and this is also now a money-spinner for the country. Cuba has contracts with several other countries to provide doctors to operate health clinics and carry out operations such as cataract removal. Operation Miracle, for example, has already restored sight to hundreds of thousands of Latin Americans. Cuban doctors work abroad for a few months or a year through such inter-government contracts and Cuba benefits from the income this generates.

Similar schemes exist for literacy teachers and increasingly for sports trainers too. Cuba is justifiably proud of its many achievements, one of the most impressive being the Latin American School of Medicine which trains doctors from poor regions of Latin America and, more recently, from other parts of the world.

We met staff and students from the school, which is set in a lovely campus by the sea. We met Vice-Dean Maritsa Gonzalez and Vice-Rector Eladio Valcarcel who told us that the idea of the school, which was set up in November 1999, came from medical brigades Cuba had sent to earthquake zones in Indonesia, Pakistan and Haiti, where they saw that poverty-stricken local populations had little or no access to doctors.

The Havana school started with 1,900 students from 18 Latin American countries. Today, after seven years of graduations, it has 10,000 students from 100 countries. All are trained free, with no tuition fees and food, lodging and a small student grant paid for by the Cuban state. The course is six years long after a one-year initial course which includes language classes for non-Spanish-speaking students.

Second-year students Joel from Guyana and Mark from the Solomon Islands told us their course was tough but that they have a lot of support to help them succeed. Mark said students are allowed to repeat years if necessary, and Joel told us: "The worst thing is getting used to the different food!"

The school is proud of the fact that 50,000 students in other countries have been trained by Cuban health brigades. Most go back to their own countries to work in the poor communities they came from. Ms Gonzalez told us: "It's like a gift from Cuba to other countries."

This article was written by Kate Clark and originally appeared in the Morning Star. The first part of the article can be read here.

The Marketing of Yoani Sánchez: Translation as invention

This article originally appeared in Spanish at TLAXCALA.

As one might have expected, Bloomberg and Reuters dutifully shaded their reports on the recent visit to Cuba of Brazil’s President Dilma Rousseff with mentions of the Yoani Sánchez Twitter campaign to pressure Rousseff to intercede on Sánchez’s behalf and persuade the Cuban government to grant her an exit visa to attend a propaganda event in Brazil.

That’s not so surprising. Sánchez is an egomaniac, for sure, insisting that anyone should care in the first place, when her compatriots Olga Salanueva and Adriana Pérez O’Connor have been denied entry visas by the United States for more than a decade to visit their husbands (Rene González Sehwerert and Gerardo Hernández Nordelo, two of the Cuban Five) unjustly imprisoned in the U.S. – but if all she has to do is tweet and the press come running, judging the tweet as equal in value to Rousseff’s criticisms of the U.S. gulag at Guantánamo, well, that’s not really her fault – it’s just part of a marketing plan that counts on press complicity.

The interesting thing about this particular tweet however, was the way that the English language press went above and beyond simple translation and repetition, entering the realm of treacherous pure invention. It’s hard to tell where the invention originated though, since both Bloomberg and Reuters used the same “mistranslation” – nearly word for word.

Matthew Bristow and Cris Valerio, reporting for Bloomberg, wrote it this way:

The 36-year-old Sanchez, a critic of Castro’s government on a blog called Generation Y, referred to Rousseff’s persecution by Brazil’s 1964-1985 dictatorship in her appeal for a visa to attend a screening in Salvador of a documentary she appears in. Sanchez has been blocked from traveling abroad for the past four years.

“I saw a photo of young Dilma, sitting on a bench blindfolded as men accused her,” Sanchez wrote Jan. 24 on Twitter. “I feel that way right now.”

Jeff Franks, for Reuters, wrote:

Last week, Sanchez wrote on Twitter that she had seen a photograph of “young Dilma, sitting on a bench blindfolded as men accused her. I feel that way now.”

A compelling image, for sure. A young blindfolded woman, harassed by barking men. Compelling, except for the fact that such a photo doesn’t actually exist.

The exact words from Sánchez’s tweet were:

#cuba Vi foto de @Dilmabr joven sentada en banquillo de los acusados y juzgada por hombres con la cara tapada. Yo me siento asi mismo ahora

An accurate translation might have been:

“I saw a photo of the young Dilma seated in the dock for the accused and being judged by men who were covering their faces. That’s how I feel right now.”

Specifically, the mistranslation repeated by Bloomberg and Reuters interpreted the Spanish verb tapar, which means to cover, as vendar, which means to blindfold. It’s hardly an innocent error given the circumstances of a military trial. But the altered meaning is even worse in English, given that it’s not the accusing judges who are described as “covering their faces,” but Dilma Rousseff who is portrayed as “blindfolded.”

Not to mention Sánchez’s weak grammar in the original Spanish which begs for correction. Even the Spanish language press couldn’t resist retouching the tweet. Here’s how Argentina’s La Nacion fixed it:

“Vi la foto de Dilma sentada en el banco de los acusados y siendo juzgada por hombres que se tapan la cara. Yo me siento así ahora”

(Still well under 140 characters in case anyone thinks the original bad grammar was due to Twitter restrictions.)

And here is the photo. No blindfolded Dilma. Two men in military uniforms shielding their faces from the camera with their hands.

Thanks to WikiLeaks, we’ve known for some time that Sánchez’s “interview” with Barack Obama was actually produced by the U.S. Interests Section in Havana, not by Sánchez. How is it that a Cuban blogger can count on such teamwork – a superpower’s diplomatic staff at her disposal and a press that edits and refines her tweets?

So who really dug into the archives for the Rousseff photo and prompted the conflation of Cuba’s immigration office and Brazil’s military dictatorship, through a translation designed to sharpen that conflation and render Sánchez’s plight even more poignant and tragic?

Marketing has always recognized the ancient law of contiguity as an essential concept: as human beings we have the tendency to associate ideas or images with the ideas or images that immediately precede them, and therefore the martyrdom evoked by the characterization of a blindfolded Dilma Rousseff harassed by vociferous Brazilian military men is not accidental, but a deliberate selection to create the effect for the reader that Yoani Sánchez is the new martyr for our time. Keep in mind that most readers will accept at face value the translation proffered by the media and will not bother to look up the photo.

Who’s behind it all? Bets, anyone?

Where next for Cuba?

Recent changes to Cuba's economy have raised many questions. Some see them as a move towards capitalism and as a recognition of the failure of socialism. But what is the truth? On a recent visit to the island as part of a Morning Star/Cuba Solidarity Campaign media group, we were able to get a clearer idea of what is going on.

"Many of these changes are simply a legal recognition of what was already common practice," one Havana teacher tells us.

"Garage mechanics, barbers, painters and decorators - all these sorts of tradesmen were already working outside the official economy. By legalising their work, the state can now get tax revenue from them."

One of Cuba's big problems is the generation of more capital through an efficient tax system.

"We don't really have a tax culture here," Pita Montes, of the Cuban Communist Party's international department, explains.

"Over 50 per cent of our GDP goes on free healthcare, free education, sports and cultural activities for the population and on social security to pay for social care for the elderly, disabled people etc.

"As the non-state sector grows, the self-employed have to be made aware that they must pay tax, otherwise the state will not be able to afford to continue to give all this gratis to our people."

Cubans call such tradespeople "workers on their own account." There are now self-employed "bici-taxistas" - tricycles that carry two passengers - taxi-drivers, hairdressers and barbers, restauranteurs, garage mechanics, painters and decorators and many others. By last September almost 330,000 were self-employed, of whom 60,000 were women and 7 per cent of whom had not been in work before, Montes tells us.

"We are intent on upgrading our economic model, not transforming it wholesale," Montes says.

"Changes are being introduced on the basis of socialist ownership.

"Most people here do support the revolution. You won't find insults against our leaders in our mass media, but you will find plenty of criticism."

And perusing the national daily Granma, one can certainly find readers' letters denouncing malpractices and corrupt officials, plus editorials and features in that vein too. However the question is whether the airing of such criticism is merely a safety valve or whether anything is likely to change as a result. One of the problems in today's Cuba is the number of people who are not "labour-active," as Montes puts it.

"We are reorganising the labour force," she says.

"Some people might take early retirement, others might find a different job in another state sector - construction work or in agriculture, for instance."

Retraining commissions have been set up to help people who have been outside the labour force to find work.

"There is employment for everybody," Montes maintains, "but not all of it will be office work."

One problem is the number of people, many of them young, who have got used to not working, among them the jineteros who plague foreign tourists asking for cucs - the hard currency used in Cuba alongside the national currency which local wages and salaries are paid in.

The jineteros must be the most well-dressed and well-fed beggars anywhere in the world. They are not poor in the real sense of the word - they have free healthcare, free education, even including university education, and free milk for their children up to the age of seven, but in Cuba fashionable clothes and shoes, some imported food products and the latest electronic hardware are only available in cucs.

It will not be easy to get young people like these, who have got used to not working, to move into the sector which the party and government have identified as crucial to the national economy - agriculture. To get people who are used to a relatively easy city life to move into the countryside to work as farmers would not be easy in any country, but in Cuba, where farm mechanisation is not widespread, it will be even more so.

"Food production is a question of national security for our country," the Communist Party official says.

"We need to promote agricultural production so that we become more self-sufficient."

Farmers are being given permission to lease land - any size from 13 to 33 hectares - on 10-year contracts. Cuba has six million hectares of arable land and currently 20 per cent of this land has been leased in this way to farmers.

"Between 2008 and 2011 we have given over 1.3 million hectares on lease.

"We draw up contracts with these farmers to produce such-and-such a product," Montes says, "but the land continues to belong to the state."

The government is opening shops to sell farming tools and materials and the system of credits to new and existing farmers is being introduced, but is still in its infancy. This explains why 20 per cent of agricultural land is at present unproductive. Again, the US boycott is partly to blame, as it would be much cheaper for Cuba to import agricultural machinery and tools from its nearest neighbour, the US, than to have to import from Europe or circuitously via third countries. For historical reasons a small number of farmers own their own land, such as Benito Camejo, a tobacco farmer we visited near Vinales. His family had owned vast tobacco-growing fields before the revolution, he tells us.

"After the revolution most of it was confiscated," Camejo says, "but we were left 10 hectares and we have continued to farm this land and produce the finest tobacco in the world," he says with a laugh.

A tall, slim man with a lined, tanned face, he lights up one of the cigars his little factory produces.

"One of these a day will keep you in good health!" he exclaims.

We see that he and his family live quite well. He has his own house with several outbuildings. A big pile of breeze blocks lies nearby ready for an extension he plans to build soon. He works together with his brother and their families, raising a few domestic animals, growing their own coffee, salads, fruit and vegetables.

Camejo has a contract to sell 90 per cent of his cigar production to the state. The other 10 per cent he and his family can use for themselves or sell privately. It has become possible now for Cuba to decentralise its economic model in these ways by making small trades independent of the state due to the fact that the so-called "special period" during the 1990s had ended.

Those were the tough years after the collapse of the Soviet Union, which had been Cuba's main trading partner, when all trade and investment from the socialist countries suddenly came to an end and Cuba had to fend for herself economically.

Cubans refer to that period as very hard, a time when they barely had enough to eat. Yet the people seem to understand the need for that special period, as well as expressing relief that it was now over and that the economy is now - to some extent at least - looking up.

In addition to the promotion of the non-state sector, Cuba has also taken steps to make ministries more efficient. Sugar was traditionally Cuba's main product, but not any longer. Tourism is much more profitable and not so labour-intensive, so Cuba is expanding that sector very rapidly. Big new hotels can be seen along the western seaboard of Havana, in Miramar and beyond. Most of the foreign tourists are from Canada, with Britain in second place.

Many basic foodstuffs are provided by the state through a ration card system. Rice, oil, coffee, meat, pork, chicken, beans, flour and some other items are sold at very low prices to each member of the family in the same amounts, irrespective of whether the individual is a baby or an adult. Eighty per cent of these rationed items have to be imported at present, which is obviously a heavy drain on the state economy. Yet there is no reason why these same foodstuffs cannot be grown and produced in Cuba - just as pork is, of which there is an abundance.

"We want to move towards subsidising people rather than subsidising products," Montes explains.

"At present a high-earner pays the same for these products as someone on a low wage, which isn't really fair."

But the government is moving very cautiously on this one, she adds, as to cut rations to above-average earners overnight would cause too many problems for people. For the time being, rationing will continue. Cubans are very open about their feelings. They range from enthusiastic support for the government to disgruntlement with the economic situation. But all recognise their country's achievements, especially in free high-quality healthcare and education, and are aware that this is far from the case in other Caribbean and Latin American countries.

This article was written by Kate Clark and originally appeared in the Morning Star