Cubans to Begin Paying Taxes

cuba-income-taxesPayments to social security and income tax deductions begin next month for many Cubans. Photo: Cuba Business Report staff.

Approximately 1.5 million Cuban workers will be required to pay income tax next month. This will be the first time that most Cubans will pay taxes since 1959. It will take effect starting in October this year.   Those working for government companies and industry workers will have to contribute 5 percent in social security taxes on earnings above 500 pesos or around $20.  Those earning more than 2,500 pesos or $100 per month will pay income tax  between 3 to 5 percent according to the Cuban State Media.

Granma, the Communist Party daily reported that Meisi Bolanos Weis, the Deputy Finance Minister, had stated that these deductions would be automatically taken off workers salaries by employers.

Taxes have been abolished in Cuba since Fidel Castro’s 1959 revolution. Wages for state workers is generally low.  However, the government subsidizes food, utilities, social security, transportation, health, education, culture and sports.

The average monthly wage of workers in Cuba last year was 687 pesos (CUCs), or $25 as per the official exchange rate. This figure is the average wage of 5 million workers in the labor force, 80 percent of whom work for the state. Some workers have been paying social security and taxes in the last few years.

The Cuban government economic plans to replace all subsidies with targeted welfare signify the end the predominantly tax-free lifestyle. However, this new code is being implemented slowly but surely as there are certain conditions that must be conducive to these rules. Other taxes involving property and inheritance are currently on hold.

These laws were first applied to people working for foreign companies, business owners and cultural figures. In recent years, it has also been applied to approximately 500,000 Cubans who are self employed and hundreds of thousands of farmers.

Previously, people working in the education and health sectors were not required to pay taxes. Over the last three years they began paying social security taxes and will begin paying income taxes soon.

Currently, the average Cuban barely earns enough money to begin paying taxes.  New taxes and social security payments may be a difficult adjustment to make in the daily lives of people.

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