* Some state companies to be granted greater autonomy
* All Cubans to pay income and property taxes
* New cooperatives to divide profits as members see fit
By Marc Frank
HAVANA, July 26 Cuba adopted a new tax code this
week and said it would loosen regulations on some state
companies while turning others into cooperatives, as one of the
world's last Soviet-style economies moves in a more
The plans were announced at a session of the National
Assembly, which passed the country's first comprehensive tax
code since the 1959 revolution on the communist-ruled island.
Foreign journalists were barred from Monday's meeting, only
portions of which were later broadcast by the official media.
President Raul Castro, 81, has liberalized regulations for
small businesses and farming, and begun leasing small state
retail outlets to employees since taking over for his ailing
older brother Fidel in 2008. But he now appears ready, says Cuba
expert Phil Peters, “"to put some meat on the bone."
Marino Murillo, head of the Communist Party commission
responsible for implementing reforms approved at a party
Congress last year, characterized the tax law as providing the
basis for "“bringing up to date the economic model," while
releasing few details of the code.
The new law takes effect next year and is scheduled for
publication next month.
Castro's point man for reform said it would gradually
replace an old Soviet-style system and eventually require
everyone to pay income and property taxes for the first time
since the 1960s.
Murillo, in a two-hour presentation to the National
Assembly, announced that an unspecified number of state
companies would be partially deregulated by the end of the year.
He said the companies, previously part of various
ministries, would be able to make day-to-day business decisions
without waiting for government approval, manage their labor
relations and set prices. After meeting state contracts, they
will also be able to sell excess production on the open market.
The companies will be self-financed, including through bank
credits, and expected to cover their losses, versus handing over
all profit to the state and receiving financing and subsidies
from the treasury.
Instead of being micro-managed by the ministries, Murillo
said the companies would be evaluated by "“four or five
indicators" such as earnings, the relation of productivity to
salaries and their ability to meet the terms of state contracts.
Murillo also announced that 222 small to medium-sized state
businesses were preparing to become cooperatives, ranging from
restaurants and produce markets to shrimp breeding and
The cooperatives will lease state property and equipment at
10-year renewable intervals, operate on a market basis, pay
taxes like other companies and divide profits among members as
they see fit, Murillo said.
"SLOW BUT STEADY"
“"They have been rolling things out one by one on a slow but
steady timetable and my guess is they will continue to do so.
It's a timeline that goes to 2015," Peters, a vice president of
the Virginia-based Lexington Institute, said.
"Now they are getting to the things that really have the
ability to increase the size of the private sector and create
the savings in the state sector that they say are their
targets," he said.
Cuba, with a foreign debt of more than $22 billion according
to Reuters' estimates and still mired in a post-Soviet crisis
after 20 years, has no choice but to change its inefficient
ways, government insiders say.
Marino said as much during the National Assembly meeting.
"“We are not calling for turmoil ... but the reality of life
shows we can not maintain (a command economy)," he said.
The five-year reform plan calls for moving from government
administration of just about the entire economy to managing it
through “"indirect" means such as taxes and bank credits.
Most retail services and minor production and farming are
scheduled to go over to a “"non-state" sector that will account
for more than 40 percent of the labor force, compared with the
current 15 percent.
At the same time, the Communist Party plans to move away
from a paternalistic state system of collective work and
consumption to one where individual effort is better rewarded.
Across the board subsidized goods and services are to be
replaced by targeted welfare.
Castro, who closed the National Assembly meeting, said the
new measures would “"permit the state to forget about the
administration of a set of secondary services and productions
and concentrate on improving the management of the basic means
of production which will remain as socialist state companies."
Murillo also announced that the government would lease to
its employees more than 1,000 small cafeterias, following in the
footsteps of barbershops, hairdressers and a host of other minor
services let go over the last few years.
The former state establishments now must compete head to
head with a burgeoning small business sector of more than
300,000 mom-and-pop operations, including restaurants and other
Murillo said the new tax code would cut small business taxes
on average by between 3 and 7 percent and provide other benefits
for start-ups, such as eliminating the labor tax for those with
five employees or less.
The new law will also benefit small farmers, he said.