Holguín, Cuba, Increases Tax Pressure on ‘MSMEs’ and Threatens Other Measures

The Municipal Assembly proposes forcing companies to lower their prices for their “essential” imported products

An ’MSME’ from Holguín dedicated to the sale of toiletries and food / Facebook / Dimensions

14ymedio bigger14ymedio, Miguel García, Holguín, May 22, 2024 –Bleeding MSMEs [Micro, Small and Medium Enterprises], the only entities on the Island that remain afloat in the unstable Cuban economy, seems to be the new plan of the city of Holguín to raise money. Raising taxes on companies and forcing them to sell “essential products” at the official exchange rate of one dollar for 120 pesos are among the measures that the authorities threatened to implement last week during a meeting of the municipal Assembly with a group of businesspeople, as confirmed by local sources to 14ymedio.

The possible increase in taxes, just a few months after the announcement of the end of the 10% exemption in taxes for one year for newly created private companies and for six months for converted ones, coincides with the desperation of the State to raise everything possible on the Island to oxygenate its budget. The measure puts the noose around the necks of private owners, but another threat, even worse, suggests the obligation to apply the official exchange rate of one dollar for 120 pesos for the sale of products that have been purchased at the much higher rate that holds in the informal market (between 350 and 400 to 1), the only market where they can get foreign currency to import goods.

In an interview with this newspaper, one of the MSMEs owners who attended the meeting with the authorities, and who prefers not to reveal his name, assures that the businesspeople did not sit idly by in the face of the Assembly’s proposal. “The fact that they want to raise taxes would force us to increase the price of the products, because it is something that works like a chain: the more expensive the procedures, the higher we must charge. But now they tell us to open our doors so that they can audit our prices and that we must lower them,” he explains.

The possible measures were proposed by the Holguín authorities who, like each local government, have jurisdiction over these issues in their territory

The possible measures were proposed by the Holguín authorities who, like each local government, have jurisdiction over these issues in their territory. At the moment, it is not known if similar actions have been proposed in other provinces. In this sense, the businessman regrets that state policies towards private businesses are, in his opinion, misguided. “They pressure us more and more and what we sell we have to pay taxes on, imports, salaries of employees and also generate profits. If not, the company is going to collapse because it does not have a state budget to maintain it,” he claims.

Osmany, the owner of another Holguín MSME that sells food, who also attended the meeting, told 14ymedio that, while waiting for “the happy audit,” he has had to stop all deliveries from his suppliers. “I don’t know when this process is going to start, but they are going to review all the cost sheets and tell us the prices at which we will have to sell our products,” he laments.

“I already have some debts with my suppliers and if they force me to sell at the official rate, I will be bankrupt. It makes no sense for us to buy the dollar at almost 400 pesos in the informal market because the State itself does not have enough liquidity to sell it and then we must sell at the official exchange rate,” he explains.

According to Osmany, he was not the only one who was uncomfortable with the authorities’ announcement. “Other businesspeople also said they did not agree. One even clarified that they could supervise whatever they wanted in their business, but that as soon as they finished they were going to close it, because the accounting didn’t work,” he says.

As the Holguín resident explains, neither the authorities nor the press have not offered an official version of these measures, but rumors of the closure of MSMEs are already heard in the streets of Holguín. For Jesús, a tricycle driver from the main city, “that is the worst thing that could happen in this crisis situation.” “It is true that MSMEs are expensive, but they are the only place where you can get food. They are necessary,” he says.

“Private stores are the only places where you can buy a bottle of oil or flour or sugar. With the blackouts, which are in all their glory, if they also take away our food, I have no doubt that people will take to the streets to protest,” he points out.

“Private stores are the only places where you can buy a bottle of oil or flour or sugar”

The owners of private MSMEs in Holguín have been the focus of attention for weeks. On May 10, this newspaper published an article about the agreement of at least 14 businessmen to try to lower the price of the dollar.

“At the Foremp (Business Forum) the topic that was talked about the most was precisely the price of the dollar, which is practically becoming priceless,” according to the owner of a private business who participated between April 30 and May 2 in the second edition of this event, which took place at the Brisas Guardalavaca hotel in Holguín. Among the more than 180 participants, the biggest concern was the depreciation of the Cuban peso, which, they complain, forces them to need more and more national currency to acquire dollars, essential for the import of products and raw materials.

During the meeting, the 14 entrepreneurs from Holguín agreed to publish on their social media accounts and other anonymous profiles alleged sales or purchases of foreign currency at a price lower than the El Toque rate and not to pay more than 350 pesos, convinced of achieving a fall, even if minimal, of the currency.

The dollar did suffer a “temporary” decline this week, although the cause, according to El Toque, is far from being related to Holguín businessmen. In fact, the media expects that, as the causes of the depreciation of the peso do not disappear – fiscal deficit, inflation, the issuance of currency without backing, among others – the trend will remain the same.


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