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Why does Cuba maintain a 10% tax on U.S. dollars in cash?

Cuba cash dolarWhy does Cuba maintain the 10% fee? Because our reality is unique, because of our audacity, because not yielding to the pressure of the most powerful empire in the world has become a matter of principle, and because economic sovereignty sustains the independence we defend, since Cuba’s road to development is not like anyone else’s.

Our struggle to consolidate sustainable progress is a battlefield, and those who still think the U.S. blockade is used as a political pretext are revealing incredible innocence, or simple ignorance.

The blockade is an act of war. Defending ourselves, resisting, is a legitimate right.

Based on this principle, in 2004, the Cuban government made the sovereign decision to establish a 10% tax on U.S. dollars in cash that entered the national banking system, given prohibitions on our operations in such currencies with foreign banks.

The issue of this fee had not attracted much attention from Cubans, since individuals used predominately the national currency (CUP) and the convertible peso (CUC), in everyday purchases.

Many questions on the 10% charge have, however, emerged, since the government approved a package of economic measures including the authorization of retail sales in foreign currencies to the population, in stores established for this purpose, where payments are made with magnetic cards associated with a foreign exchange bank account.

- Thus Granma presents some responses offered by the Central Bank of Cuba on the subject, recalling the causes that motivated the 2004 decision, and explaining the validity of the measure given the international financial persecution Cuba faces, and how this mechanism protects commercial operations.

- What led to the 2004 government decision to establish the 10% fee on U.S. dollars in cash?

As part of its aggressive policy against our country, the United States government pressures and threatens foreign banks to prevent Cuba from depositing U.S. dollars (USD) in cash, which the population and foreign visitors pay to establishments which, at that time, functioned in foreign currencies.

Depositing USD banknotes in foreign banks is essential to meeting the country’s commercial obligations, since imports of products are not purchased in cash, but through bank operations based on Cuban funds available in banks in different countries.

When dollars are received as banknotes, to be used in international transactions, Cuba must send them abroad and find banks willing to accept them, which implies high risks and additional costs.

Thus, in response to such actions, meant to hinder Cuba’s international transactions, in 2004 the Central Bank of Cuba issued Resolution No. 80 of October 23, with the fundamental objective of discouraging the entry of USD in cash to the Cuban banking system.

Taxing dollar bills that entered the country, served two purposes: first, to compensate for the costs and risks associated with their physical transfer abroad, in the context of the blockade’s tightening, and to economically motivate those who wish to bring money into the country to do so through a bank or the use of other currencies, without the aforementioned restrictions, such as Canadian dollars, euros, pounds sterling, Swiss francs. etc.

- Why are only U.S. dollars in cash taxed?

To discourage the entry of cash in this specific currency.

- Are bank transfers in USD, received from abroad, subject to the charge?

They are not, since bank transfers do not imply the aforementioned costs and risks associated with the physical manipulation of cash. Therefore, no tax is levied on such transactions.

- Are international card transactions taxed?

Operations associated with magnetic cards are not subject to the 10% charge. In Cuba, Visa and MasterCard magnetic cards, not issued by U.S. banks, are accepted.

- Why is it necessary to maintain the tax on U.S. dollars in cash?

Over the last few years, the U.S. government has continued to intensify its economic war against the Cuban people, dictating new measures that cause significant damage and create serious challenges to normal international financial activity. The tendency of foreign banks and financial institutions to refuse operations with Cuban banks is on the rise.

The Central Bank of Cuba, in its public information efforts, has reiterated that the tax established for operations in U.S. dollars in cash has been, and will continue to be, a subject that is regularly evaluated, and one that receives ongoing attention from the banking system and Cuban government authorities.

- Financial effects of the U.S. blockade on Cuba

Among the principal laws approved by Congress, and administrative provisions that sustain the blockade policy, is the stipulation that no individual or legal person, from the United States or any third country, may carry out transactions in U.S. dollars with Cuba.

In addition, since making payments in U.S. dollars to third parties abroad is prohibited, it is necessary to purchase reimbursement currencies, with the consequent losses associated with multiple exchanges.

At this time, damages caused by the negative impact of the prohibition on using U.S. dollars are estimated to have reached 85,139,436 dollars and increased costs of financing due to the country’s high risk rating has reached 47,290,204 dollars.

Between April 2018 and March 2019, Cuban transactions with 140 banks in other countries were affected. During this period, the number of foreign banking institutions refusing to provide Cuba services, citing the U.S. blockade, increased by 12.

Source: Report of Cuba on Resolution 73/8 of the United Nations General Assembly “The necessityof ending the economic, commercial and financial blockade imposed by the United States against Cuba.”


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