Sunday, September 19, 2010

More details on new entrepreneurship policy

More details on new entrepreneurship policy

Here's another document (pdf), apparently a Cuban government briefing
paper that is being used to explain the policy announced Monday to move
a half-million government and state enterprise employees to an expanded
private sector.

It was first posted at the German-language site and then
at Penultimos Dias, and adds some new details.

The layoffs and expansion of trabajo por cuenta propia begin in October.

The government is apparently going to address the problem of supplies,
which has resulted in many licensed entrepreneurs resorting to
black-market sources. This would be a big step forward, in both
practical terms and in political terms, because it would show that the
government is interested in creating conditions for entrepreneurs to
succeed. The new policy, the document explains, is "to maintain limits
on granting new licenses only for those activities that don't now have
legal means for acquiring raw materials and other materials they need,
and to create conditions for the sale of these resources, which will
allow the elimination of this restriction."

Several prohibitions that now affect cuentapropistas will be eliminated.
Eligibility for new licenses will no longer be limited to retirees and
those with a current workplace (vinculo laboral), which would appear to
open the door to those who have been working without a license and now
want to join the legal system. Among other changes, they will be
permitted to sell goods and services to government entities, and they
will not be limited to doing business in their own municipio.

They will also be eligible for bank credit, another important change.

There is also a discussion of taxes. In addition to the current tax on
income, taxes will be based on sales, the hiring of labor, and social
security contributions.

The real economic impact of taxes on the sector is a function of two
factors: the tax rates themselves, and the honor system where
entrepreneurs (whose transactions are almost entirely in cash) keep the
books on which their taxable income is based. If you document and
declare less than your real income, a high tax rate is much easier to

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