(Repeats with no changes)
* Cuba publishes first comprehensive tax code
* Code signals changing economic landscape
* Tax-free life under paternalistic government on way out
HAVANA, Nov 28 (Reuters) - Most Cubans have not paid taxes
for half a century, but that will change under a new code
starting Jan. 1.
The landmark regulations will change the relations of Cubans
with their government and are a signal that market-oriented
reforms, launched since President Raul Castro succeeded his
brother, Fidel Castro, in 2008, are here to stay.
The recently published code constitutes the first
comprehensive taxation in Cuba since the 1959 revolution
abolished just about all taxes.
In the 1990s after the collapse of the Soviet Union, the
country's main benefactor, the Cuban government imposed a few
scattered taxes, but mostly preferred to maintain low wages so
it could fund free social services.
The government's free market reforms introduced over the
last two years, are designed to encourage small businesses,
private farming and individual initiative, along with plans to
pay state workers more. Under the new tax code the state hopes
to get its share of the proceeds.
The government also envisions replacing subsidies for all
with targeted welfare, meaning that the largely tax-free life
under a paternalistic government is on its way out.
"This radically changes the state's relationship with the
population and taxes become an irritating issue," said Domingo
Amuchastegui, a former Cuban intelligence analyst who lives in
Miami and writes often about Cuba.
The new code covers 19 taxes, including such things as
inheritance, environment, sales, transportation and farm land,
various license fees and three contributions, including social
security.
A sliding scale income tax - from 15 percent for earnings of
more than 10,000 pesos (about $400) annually, to 50 percent for
earnings of over 50,000 pesos, (about $2,000) - adopted in 1994,
remains in the new code for the self-employed, small businesses
and farms, but it also includes a series of new deductions to
stimulate their work.
TAX DEDUCTIONS
For example, farmers may deduct up to 70 percent of income
as costs, and small businessmen, who are taxed by income not
profit, up to 40 percent, plus various fees and secondary taxes
they pay.
A labor tax of 20 percent will gradually be reduced to 5
percent by 2017, and small businesses with five employees or
less are exempt.
Eventually all workers will pay income taxes as well as a
new 2 percent property tax, but both measures are suspended
until "conditions permit" them to go into effect.
The government admits, with an average pay of about 450
pesos per month, or $19, many workers do not earn enough to make
ends meet.
"They collect taxes for all these things around the world,
it's normal," said Havana economist Isabel Fernandez.
"But here we face two problems. On the one hand we are not
used to paying for anything and on the other our wages are so
low we can't spare a single peso," she said.
Under the old system, large and small state-run companies,
which accounted for more than 90 percent of economic activity,
simply handed over all their revenues to the government, which
then allocated resources to them.
The reforms call for large state-run businesses to be moved
out of the ministries and become more autonomous.
Under the new tax system they will pay a 35 percent tax on
their profits, but can take advantage of a myriad of deductions
ranging from amortization and travel to sales taxes, insurance
and environmental protection.
Many smaller businesses will become cooperatives or be
privately leased and taxed based on income.
The state-owned Cuban National News Agency said Cuba had
studied the tax systems of a number of other countries,
including several with capitalist economies.
"The experiences of China, Vietnam, Venezuela, Brazil, Spain
and Mexico were taken into account, but they were refined to the
particularities and conditions of the island," the new agency
said.
The new code is not etched in stone - it can be amended each
year as part of the annual budget passed by the National
Assembly, and temporarily modified for different reasons by the
executive branch of government.
"Like the reforms, it is a work in progress, a work that has
barely begun and will take time to put in place," said a Western
businessman who has worked in Cuba for almost two decades.
But, he added, "this is of course a major step forward
toward the 21st century and a modern state."
(Editing by Jeff Franks, David Adams and Paul Simao)