Taxes Triple on Imported Tobacco and Alcohol in Cuba

Cubans believe that national tobacco will be scarce, and it will not be possible to cover demand with the increase in the tax on imports. (14ymedio)

14ymedio bigger14ymedio, Madrid, 26 January 2024 — The Cuban Government announced on Thursday the increase in tariffs for the import of cigars, cigarettes, rum and other alcoholic beverages. For all these products, the general rate becomes 30%, while for countries considered a “favored nation” it will be 15%. In both cases, the percentage is tripled, since before it was 10% and 5%.

These increases were announced by the ministers of Economy and Planning, Alejandro Gil, and of Finance and Prices, Vladimir Regueiro Ale, in a Round Table program at the end of December.

“We are increasing tariffs for these products that are similar to national production, which we must continue to stimulate and protect, favoring exports and the greater presence of our products in the national market,” Regueiro explained.

Although finished products in general were mentioned, in the Official Gazette published yesterday, tobacco and alcohol are the only ones included

 Although finished products in general were mentioned, in the Official Gazette published yesterday, tobacco and alcohol are the only ones included. We will have to wait to see if the measure extends to other products and if there will be shortages because of the increased tariffs.

The Gazette also includes another resolution about tariffs on the import of raw materials, inputs and intermediate goods. They are reduced by half “for production processes, with a special focus on food and agricultural production,” the text reads.

The objective of these measures, as announced by the authorities on television, is to stimulate domestic manufacturing. “At the end of November, imports made by non-state economic actors exceeded $1 billion. It is an important figure, and those imports are generally characterized by being finished products. That does not bring added value to our economy,” said the minister, who admitted the complexity in some cases where the product can be finished or intermediate depending on how it is used.

Regueiro gave as an example the case of flour, which can be sold in a store or bought to make bread, although the case is extended to others, such as oil. On the other hand, it is not the case of tobacco and alcohol, which were the obvious candidates for the application of higher tariffs. As for imported food, everything seems to indicate that the Government has chosen to wait, since a tax increase would seriously affect the supply of basic food through the private enterprises, which do not yet have the capacity to transform raw materials into products for national consumption.

The first reactions have not been positive, as expected. Although some users have admitted in the official press that these are not basic necessities, so the case is not so serious – which predicts the effect it will have when the rule is extended – most express their fear that it will mean the lack of capacity of the Cuban industry to cover that demand.

“It matters because the national industry is very far from meeting national demand,” says a reader on Cubadebate. “But how nice it would have been if they had taxed tourists for bringing in products that can be bought in the country.”

Some pointed out that the increase in the exchange rate — dollar to pesos — which goes from 1×24 to 1×120, and causes, in reality, the tariffs to increase 2.5 times, although others refute it

“I do not doubt that with the announcement, tomorrow those who sell beer will increase the price and say that they do it because of the increase in the tariff. They can also hide the beer for a few days so that the demand grows and then take it out with a higher price, despite the fact that they have it in the country before this publication,” says another, calling the sellers “scoundrels”.

It could be expected that the reaction to the lowering of the tariff to import raw materials would be more positive, but the initial comments do not report a great reception. Some pointed out that the increase in the exchange rate, which goes from 1×24 to 1×120 — dollar to pesos — and causes the tariffs to increase 2.5 times, although others refute it.

“But the increase in the exchange rate also applies to the import of finished products, it is for everything. Although the exchange rate increases, the tariffs for intermediate products will be 50% lower than for the finished ones, which is the intention,” one reacts.

The feeling, after so many years of failures, is not one of optimism. “Of course there is no reduction. Well, yes: of words. We are an educated people, you don’t have to be an economist. Hopefully this new improvisation will give the expected results or at least come closer.”

Translated by Regina Anavy


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