Closing the Door to Cuba...Again

The president took predicted action with regard to travel to Cuba. As part of the new policy we Americans will no longer be able to take our own private trips to Cuba which I did and which I discuss on this blog. We will be forced again to take authorized educational tours which will also be subject to strict new rules and audits to ensure that we are not going just as tourists.Those tours will keep people from going where they want and talking to whomever they please. My urgency suggesting you go to Cuba yourself to see things with your own eyes continues unabated. These new restrictions will only make it terribly more expensive to do so. It appears the Trump position will once again promote the embargo and strategy which has failed over the last 50 years. Cuba will be fine. It is moving forward, I have seen it with my own eyes and talked to many Cubans there who agree, but it is doing it with the help of China and Russia.

Cuba Si Yankee Si?

I have just returned from Cuba. It was all legal. In years past one was required to go from Europe, Canada or Mexico or some other Caribbean country via a puddle jumper. These days making the trip from the good old USA is a lot quicker and safer. I spent six nights in Havana. The purpose of my trip was professional research.  If you don’t believe me just take a look at the self-certification I filed with the State Department. When you book your air fare your computer screen your airline will give you the choice of things like visiting family, religious reasons, professional research, education and the like. You select one and that’s that. I understand that you are to keep a journal of your activities for at least five years. Fortunately I keep extensive journals of all my travels and can easily comply. I do have to wonder how many people are actually keeping this kind of journal. And what agency of government is charged with reviewing this kind of documentation. IRS? Note that getting a suntan on one of Cuba’s marvelous beaches is not included. For me, I wanted to see with my own eyes how socialism was doing in a country that is 775 miles long and no wider than 120 miles at its widest. Ever since Fidel Castro died his brother Raul has been somewhat relaxing the socialist approach to good old-fashioned making an extra buck or two. Now Havana has got a population of 2 million and the entire country just a little less then 12 million. It has the Atlantic Ocean to the north and the Caribbean Sea to the south and as most people here are aware is a mere 90 miles from Key West. If you’re old enough to remember the Cuban missile crisis you can close your eyes and see a very stern and stressed President Kennedy trying to deal with Russian missile installations that could easily reach the United States. So here is the scoop on Cuba these days: First, let me say unequivocally that you should visit Cuba as soon as you can. There is no need to go with a high-priced tour and traveling directly from Newark is relatively cheap and easy. The flight is under three hours. I was fortunate enough to travel to Russia in 1993 just as the Soviet Union fell apart. Within no time things changed over there dramatically. The same thing is going on in Cuba though the socialist regime does not look like it’s collapsing anytime soon. It will be the comprehensive tax law changes which became effective January 1, 2013 that may lead the way to major change. That law contains 19 different taxes that will apply to Cuban business and Cubans in general. Up to now 80% of Cubans worked for the state and had little concern for any taxes. That has already changed with workers contributing to a Cuban version of Social Security. And there are plenty of other taxes on the way. They include sales tax, a comprehensive income tax, employment taxes, environmental and resource taxes. Starting to sound familiar? Only a tax lawyer would love the complication. There appears to be two tax types: profits based on an accounting and a monthly fee based on occupation. The government sets preliminary monthly tax quotas based on occupations. Rates are set annually in their budget which by itself has to create a great deal of problems.  If the preliminary tax that is paid is higher than that due at the end of the year apparently no refund is made. The taxation of retailers allows a cost of goods sold but it is limited by a figure determined by the government arbitrarily. There is also a property tax on acquisition as well as a 1% tax for property acquired in a divorce. Inheritance taxes will also apply depending on relationship to the decedent. The rates begin at 7% and go as high as 65%. Taxes on public documents and certifications are due and payable by stamp. Not to be outdone there is a tax for using toll roads which amounts to three dollars for each 50 km traveled and applies to cars, motorcycles, trucks, wagons and vans. An airport tax, which I paid, amounts to $25 arriving and departing. Most self-employeds now in Cuba pay their tax under the simplified monthly payment method. Needless to say Cubans are feeling their way with regard to taxation. Excessively high rates will result in the creation of an underground economy. The arbitrary allowance for costs for example allow farmers to deduct 70% of their revenue as costs and small business 40% as their costs. Creating exemptions and favorable tax treatments in no time can turn the Cuban tax structure into the same mess we have here in the states. Several years ago Raul Castro allowed people to apply for permits to have private businesses. In the first year about 1 million of those permits were issued. They include everything from being able to rent your casa to using your private vehicle as a taxi or your pickup truck to load cement. During my visit I stayed in a Casa. Renting the entire apartment through air B&B was simple. Clean and comfortable with hosts that spoke English and were able to answer my many “preguntas”. They told me that they have a permit for their private business which requires them to pay 30 CUC monthly and 10% of their profit. That sounds to me like the simplified method .That leaves a substantial amount left over compared to the average salary of about $25 per month for many Cubans. Cuba has a dual currency at the moment. CUC, Cuban convertible pesos and CUP, pesos for the ordinary Cuban citizen. The CUP is one 24^th of the CUC. The money looks interchangeable at first glance and travelers must be careful. The CUC these days is the equivalent to one dollar. At this time due to the congressional failure to end the fifty year embargo, Cuba extracts a 10% tax when dollars are exchanged for CUC. Dollars are not legal in any transaction in Cuba. Note, to change US dollars into Cuban currency is no problem as there are exchanges at the airport as well as banks in town. ATMs exist but do not accept US credit cards as there are no US banks in Cuba. Cuba is a cash economy and no one buys on credit. Citizens can have debit type cards which can be used at the few ATM in the city. A few miles outside of Havana the world turns into farmland where people rely on horseback and oxen. Our host named Raul and his wife have their air B&B apartment at 505 O’ Reilly in the historic district of Havana. Raul is retired from the military after 25 years of service and told me he receives a pension of about $467 CUP a month. That translates into about $20 US. Remember, for the time being, Cubans receive subsidies for rent, free education and free medical as well as a monthly allowance for foodstuffs via a ration book. It’s the tax system that’s currently firing up that may change all this as the government gets out of providing subsidies and moves to a more targeted welfare system. It may be Cuba Libre, but perhaps not for long. I can also recommend without hesitation the Cuban Mojito. It tasted different than the one here in the states. They use an herb called Yerba Buena...which means the good herb. And so it is with the right mix of rum and sugar. Music is everywhere and the Cubans seem happy and demonstrate a real joie de vivre despite having relatively little. We Americans may be able to learn a thing or two from them about working less and enjoying life more. Oh yes, the streets are filled with American cars from the 1950s. If they aren’t American, they’re Russian Ladas. Remember the Cubans turned to Russia when they were shunned by the United States. The Cubans are incredibly talented in keeping those old beasts running with jerry-rigged engines, transmissions and everything else. I guess that’s what an embargo will do to you… Make you more self-reliant. The New York Times recently reported that the Cuban gross domestic product shrank in 2016 for the first time in 20 years. It also said that about 634,000 Americans visited Cuba last year which was an increase of about 34%.  Overall tourism to Cuba was up 13% in 2016 with over 4 million tourists visiting the island country. A number of hotels are being renovated in the downtown area known as Park Central. The Cuban government says that it is not interested in creating a second Cancun because it values its country’s cultural and historical heritage. But it will most likely be tourism chiefly from the United States which will bring this country into the 21^st century. You have to wonder whether that will be the best result. Then there is the presidential politics of the moment. Donald Trump having made promises to conservative Cuban groups during his campaign to further restrict relation with Cuba citing human rights violations. Needless to say China’s violation of those same rights do not seem to be a problem for the American economy or the American people. But at the time of this writing some form of restriction on further travel by ordinary American citizens to Cuba seems imminent. The talk is that further restrictions on being able to prove the purpose of their trip will be a likely enforcement area. It will be a shame if the window to contact with the Cuban people is further closed by presidential mandate. Anyone desiring to go to Cuba to see for themselves ought to book their trip as quick as possible. Further announcement on restrictions is likely soon and will be made in Miami where the stronghold of Castro exiles exists.