Cuba to start taxing citizens for the first time

Global Business

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One of the latest economic reforms in Cuba is to start taxing more people, even with low salaries. Around a million and a half Cubans, mainly working in state run industries, are about have social security and taxes deducted from their earnings for the first time.

CCTV America’s Michael Voss reports.

Cuba to start taxing citizens for the first time

Cuba to start taxing citizens for the first time

Taxes were abolished in Cuba after the revolution in 1959, but now starting in October, state employees in Cuba earning more than 20 dollars a month will pay a five percent social security tax. CCTV America's Michael Voss reports.

The average wage in Cuba has increased by 45 percent in the three years between 2013 and 2015. It’s now around 687 pesos a month. At the current exchange rate, that’s less than $30 a month and, until now, no one expected to pay tax on these low salaries.

However, starting in October, state employees earning more than $20 a month will pay a five percent social security tax.

In a bid to boost production, many companies now pay productivity- related bonuses. Anyone earning more than one hundred dollars a month will pay an additional three to five percent tax as well. The news has received a mixed reception.

Taxes were abolished in Cuba after the revolution in 1959. Now as the country starts to reform from its old soviet style economic model, they are making a comeback. Those working in the new private sector have paid tax from the beginning. Everyone who works for foreign companies here does, too.

The deal in Cuba is that wages are low but the government provides free health and education, and subsidizes many other aspects of daily life. But as the economy continues to struggle with this generous welfare, the State finds becoming increasingly hard to fund.

One of Cuba’s big challenges right now is how to cope with an aging population. According to the government, the new taxes will help extend the social security net for Cuba’s growing number of pensioners.