Import
tax deadline has Cuba entrepreneurs on edge
By
Peter Orsi on September 01, 2012
HAVANA (AP) — A sudden jump in import
taxes on Monday threatens to make life tougher for some of Cuba's new
entrepreneurs and will mean higher prices for many of their customers
by raising the cost of goods ranging from jungle-print blouses to
jewelry.
The new measures steeply hike duties on
cargo shipments, as well as on many bulk goods brought in by airline
passengers, a crucial supply line for many of the small businesses
the government has been trying to encourage as it cuts a bloated
workforce in the socialist economy.
Officials insist the taxes are similar
to those in other countries, but many small-business owners view the
change as an ominous sign.
While the published official
description seems aimed at items such as clothing, soap, food and
other personal-use goods, it is so complex it leaves importers of
other products unsure if they will be affected, now or in the future.
Some of the entrepreneurs, such as
Javier Ernesto Matos, say they have prepared for the blow by stocking
up on parts before the tax takes effect.
He also has prepared for a worst-case
scenario if supply dries up entirely: "It's pretty shocking, but
the strategy we have in mind is to consolidate in a single shop and
leave prices the same to recoup what we can from our investment,"
said Matos, who together with two business partners operates three
mobile phone repair shops called the Cellphone Clinic.
Others say they'll have no choice but
to raise prices. That, along with the higher taxes on goods brought
in by friends, has worried consumers in a country where the average
monthly wage is about $20.
"For our family these are
important items, from a little soap to a backpack for school," a
woman identified as Loraine wrote on the state-run Cubadebate
website. "We all make sacrifices to help them. Nothing falls
from the sky. Why are they turning their backs on reality? Knowing
how many shortages there are in the country, why be so strict?"
While President Raul Castro has tried
to expand the private sector, the government has done little to
provide wholesale outlets where businesses can buy parts and
materials for the goods they sell, so many supplies are either
unavailable or prohibitively expensive due to high government retail
markups.
Arturo Lopez-Levy, a Cuban-born
economist at the University of Denver, said it's not unusual for
countries to levy high customs duties, but Cuba has exceptional
circumstances that make it inadvisable right now.
"The right timing was to create
the wholesale market first and then try to crack down on this type of
activity," Lopez-Levy said. "If you don't have a wholesale
market, then you are implementing the measures without the proper
sequence, especially if you really want to promote the small- and
medium-size nonstate sector."
"In the long term, this resolution
was necessary," he said. "Right now, it's a mistake."
The new duties seem primarily targeted
at so-called "mules," who make frequent shopping trips to
places such as Ecuador, Panama and Miami and bring back duffel bags
bulging with food, underwear, shoes and electronics.
Starting Monday, Cubans who travel
abroad more than once a year not only will pay higher tariffs,
they'll pay in hard currency rather than the more-easily obtainable
national peso, which trades at 24 to the U.S. dollar and is used for
most salaries.
Cubans will also begin paying
dollar-based sums of $4.55 a pound ($10 per kilogram) above a certain
weight to receive packages shipped by air and sea. That rate doubles
if they bring in large shipments.
The impact is already being felt by
people like Rafael, a 50-something who imports clothes to Havana.
Before, he paid the equivalent of $65 in the local currency to import
550 pounds (120 kilograms) of clothing. Under the new, progressive
duty schedule, that would apparently cost between $1,300 and $1,800.
"This idea of raising taxes is
crazy. ... I don't know where this decision came from, because it
hurts everyone," Rafael said. "But it hurts the people the
most, because we have to raise our prices."
Already costly for Cubans — a pair of
jeans costs an average month's wage — Rafael's prices stand to rise
an initial $2-3 per garment and could go up even more, he said.
previousHe declined to be identified by
his full name because his business license only authorizes him to
make clothing, but he essentially resells imported garments.
The new rules will mostly affect
clothing stands and boutiques, but could also hurt the supply of
things such as artificial nails to beauty salons, or fabric, buttons
and zippers to dressmakers.
It could also make it harder for some
Cubans to visit family abroad. Trips are often funded by agreeing to
bring back large bags on behalf of someone who pays the airfare.
The Cellphone Clinic's Matos said he
began doubling his normal purchases this summer and has stockpiled
enough parts like fragile electronic ribbons to stay in business for
two more years, no matter what.
"If buying pieces becomes more
expensive, if people are bringing in less, you have to reevaluate and
prices will have to rise," he said. "It's a bad thing,
because if you raise the price not everyone will come like before.
It's not worth it, you know?"
It's not clear that any state-run
operation would offer some of the Clinic's services, such as
unblocking an iPhone 4.
Separate tax rates cover food and
electronics, including 400 pesos (or $17) for a Cuban to import a
32-inch or larger flat-screen TV on a first trip, and $400 on
subsequent travels.
Authorities insist they're just trying
to improve service at Cuban airports, where excess baggage clogs
conveyor belts in passenger terminals. In mid-August, state-run
website Cubadebate published Customs officials' explanation of the
tariffs along with several examples.
But it did little to ease concerns,
judging by the dozens of exasperated reader complaints posted in the
comments section.
"Why should a Cuban citizen have
to pay the taxes in a currency in which they themselves are not
paid?" said a poster identified as Roberto Suarez. "That's
not fair. I don't travel, but I don't see the logic in that."
Some said the regulations could force
entrepreneurs to turn to black-market goods pilfered from state-run
concerns.
Others, however, predicted that Cubans,
famous for their knack for finding a make-do solution to any problem,
will figure a way to sidestep the duties.
"Something will be found to get
around this," said Maria, another clothing vendor who also would
not give her last name because her business activities exceed the
scope of her license. "It always happens in this country. It's
like they say: 'He who creates the law, also creates the cheat.'"
___
Associated Press writer Anne-Marie
Garcia in Havana contributed to this report.
___
Follow Peter Orsi on Twitter at
www.twitter.com/Peter_Orsi
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