Thursday, September 6, 2012

New tax in Cuba threatens consumption in a hungry nation

Cuba has slapped a new customs tax on everyday goods shipped from overseas in a drive that experts say could weaken the economy and sap consumption.
The levy took effect Monday and is payable in foreign currency. It targets goods imported by private citizens, often self-employed people who have started up businesses as part of timid reforms undertaken by the communist government in 2011.
Carmen Arias, deputy director of the customs service, said the taxes are "a way to counter this non-commercial means of personal enrichment."
But economist Mauricio de Miranda disagrees, calling the measure disproportionate and saying it could act as "a self-imposed embargo with a damaging effect on people's living standards."
He was alluding to the trade embargo that the United States placed on Cuba half a century ago, after Fidel Castro came to power.
In Cuba, where the economy is 90 percent controlled by the state, hundreds of packages and parcels arrive every day, sent by exiled Cubans to their families back home or brought in by travelers who make a profit by reselling the merchandise.
Under the new measure, merchandise is taxed at the rate of 10 dollars a kilo after the first three kilos. Foodstuffs -- exempted from such taxes after hurricanes hit Cuba in 2008 -- are also taxed now.
That's bad news for privately owned restaurants which, in the absence of a wholesale market in Cuba, relied on such shipments for products they cannot find within Cuba.
The new tax "could seriously raise prices of imported consumer goods, the supply of which is scant in the retail trade network," said de Miranda, of the Pontifical Xaverian University in Cali, Colombia.
In other countries this kind of levy is imposed to protect local producers. But in Cuba "there is no need to protect any national producer, as the consumer goods industry is incapable of meeting local demand."
"If the idea is to discourage the black market and get people to go to state-run stores, these stores would have to be sufficiently stocked at affordable prices," movie-maker Eduardo del Llano wrote in his blog The average Cuban earns less than 20 dollars a month.
For the past few years, the website has offered those few Cubans with access to Internet a veritable bounty of goods imported tax-free by private citizens and resold at prices below those found on the official Cuban market.
"It is true that goods sent from overseas have often replaced the local market, to the detriment of the state and its stores, which are poorly supplied or empty", said Cuban journalist Giselle Morales (
But most of the beneficiaries of this kind of parallel trade are "workers or retirees, whose needs exiled relatives try to meet with shipments of goods that most Cubans receive with relief," Morales says.

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