Cuba Cuts Taxes to Encourage Private Enterprise

May 30, 2011 Taxation in Cuba

Taxation in CubaThe government of Cuba is loosening national business and tax regulations in an attempt to spur growth in the national job market, and reduce the financial burden of state-sector wages.

The Cuban Council of Ministers released a statement, which was published on May 27th in the national newspaper Granma, saying that new regulations would soon be instated to ease tax burdens on small private enterprises. The publication detailed the outcomes of a Cabinet meeting chaired by the President of Cuba Raul Castro earlier in the week.
According to the release, self-employed taxpayers and entrepreneurs whose businesses employ less than five workers will now be exempt from paying payroll taxes in 2011. It is expected that the change will provide the greatest benefit to the hospitality sector. To further boost the positive effects on the industry, the government is expanding the size limits of privately-operated restaurants, from the current maximum of 20 dinners, to the new level of 50.

The government also announced a reform to the national superannuation system, stating that it will no longer be compulsory for men aged older than 65 years and women over 60 years to join the system. Self-employed individuals were also given an eight year extension to the deadline for the retroactive payments of their Social Security tax obligations.

The new reforms are intended to spur growth of private enterprises and job creation in Cuba, with the intention of reducing the number of individuals employed by the government, without raising the country’s unemployment levels. Currently, nearly four out of every five people with jobs in Cuba, are working for government departments or in state-run enterprises. In October 2010 the Cuban government began to issue licenses, allowing individuals to become self-employed. So far, 222 000 taxpayers have taken advantage of the new rules.

Photo by Un rosarino en Vietnam