Cuba will eliminate dollar tax to boost economy

HAVANA (AFP) – Cuba will eliminate on Monday the 10 per cent tax it has previously levied on the use of the US dollar – and widen the categories of products for which it can be used to pay – in response to the country’s economic crisis caused by the coronavirus pandemic and Washington’s ongoing embargo.

“We are going to eliminate that 10 per cent levy even despite the hostility and the intensifying of the blockade of the United States,” Economy Minister Alejandro Gil told state TV.

The use of the dollar has been accompanied by a financial penalty since 2004, with the government justifying the move by pointing to the difficulty of operating in US currency in the face of sanctions.

Facing a cash shortage as the embargo tightened and its own economic reforms were delayed, Cuba last year began allowing citizens to purchase household appliances and cars with dollars via bank cards.

Despite the high demand for using dollars, consumers had to deposit their money – often received through remittances – into a bank before they could use it.

With the penalty, only 90 cents of every dollar made it onto their cards.

With the tax cancelled as of July 20, demand could increase even more.

“It is a fair and logical measure,” economist Omar Everleny Perez told AFP. “To continue supplying stores, the country needs a currency that allows it to do so.”

The new rules will allow certain high-end groceries and hygiene products to be purchased using dollars in some stores, though it is so far unclear which ones.