A member of Cuba's National Assembly has raised concerns that the recent economic reforms approved by the Cuban government will not be able to fund social protection if the State fails to effectively collect taxes. This warning comes amidst widespread acknowledgment of tax evasion as a systemic issue.
Carlos Miguel Pérez Reyes, a deputy and president of a small to medium-sized enterprise specializing in programming and IT, made these comments on the state-run television show "Cuadrando la Caja." His remarks followed the National Assembly's endorsement of 176 economic measures.
"In Cuba, we are not accustomed to paying taxes, but it's precisely these taxes that are crucial. Without them, social sectors will not benefit. We must harness tax revenues to bolster social protection," Pérez Reyes explained.
He acknowledged existing inequalities, emphasizing the need to strengthen institutions to combat tax evasion, which he described as "a serious issue in Cuban society today."
Pressured Reforms and Social Inequality
The deputy also conceded that the reforms are overdue and enacted under pressure: "These initiatives should have been undertaken long ago. It's been challenging, consensus was elusive. The current context forced us to accelerate the process, more quickly than we would have preferred."
Meanwhile, Yan Pedro Carbonell Karell, Director of Macroeconomic Policies at the Central Bank of Cuba, argued for a shift towards targeted social protection, focusing resources on those truly in need. "For many years, we protected everyone equally, but with diminishing resources, this approach ends up shortchanging those who need it most," he noted.
However, Rafael Montejo, Director of the Center for Management Techniques at the University of Havana, admitted that the new measures might exacerbate social gaps: "These actions will also create inequalities, and we must address and identify them."
Economic Crisis and Tax Evasion
This discussion unfolds against the backdrop of an unprecedented economic crisis in Cuba. The Economic Commission for Latin America and the Caribbean (ECLAC) forecasts a 6.5% contraction in Cuba's GDP by 2026, the steepest in Latin America, while the fiscal deficit exceeds 74.5 billion Cuban pesos. The cumulative contraction since 2019 has reached 23%.
Tax evasion remains a significant challenge: the National Tax Administration Office (ONAT) reported nearly 820 million pesos evaded between January and May 2024.
To combat this, the government enacted Resolution 126/2026, empowering the ONAT to deduct tax debts directly from bank accounts without the account holder's consent, effective from July 18.
Key Economic Reforms
The 176 reforms include lifting the cap on private enterprise employment, authorizing private banking, non-state exchange houses, foreign investment in the private sector, and the gradual introduction of a value-added tax (VAT).
Additionally, the universal subsidy on the basic food basket, in place since 1962, will be limited to retirees and vulnerable individuals.
Understanding Cuba's Economic Reforms and Challenges
Why is effective tax collection crucial for Cuba's social protection?
Effective tax collection is essential because it generates the necessary funds to support social protection programs. Without sufficient tax revenues, the government cannot adequately invest in social sectors.
What are the new economic reforms in Cuba?
The reforms include lifting restrictions on private enterprise employment, allowing private banking and non-state exchange houses, inviting foreign investment in the private sector, and gradually introducing a value-added tax (VAT), among other measures.
How is tax evasion impacting Cuba's economy?
Tax evasion is a significant problem, as it deprives the State of crucial revenues needed to finance public services and social protection programs, exacerbating economic challenges.