How is Self-employment Being Improved?

The economy is one, not a private economy and a state one, no them and us; all actors are to be included in plans

Author: Leydis María Labrador Herrera | informacion@granma.cu

Author: Mailenys Oliva Ferrales | internet@granma.cu

Author: Ronald Suárez Rivas | internet@granma.cu

February 16, 2021 11:02:16

Photo: Ariel Cecilio Lemus

"The economy is one, there is not a private economy and a state one, there is no them and us, we are working to include all actors in the plan," stated Alejandro Gil Fernández, Prime Minister and Minister of Economy and Planning (MEP), during a February 8 appearance on the Mesa Redonda television program, focused on efforts underway to improve self-employment in the country.

The program, which also included the participation of Minister of Labor and Social Security Marta Elena Feitó Cabrera, and Minister of Finance and Prices Meisi Bolaños Weiss, addressed the integrated concept which guides the policy and its particulars.

According to the Deputy Prime Minister, the fact that this sector has been severely affected by the tightening of the blockade, which has limited the performance of activities, has been taken into account.

During 2020, the impact of the pandemic, which has caused a generalized contraction of the economy, was added to this reality.

These two elements have also conspired to produce a significant reduction in tourism, which directly affected a large number of self-employed workers.

He pointed out that the monetary re-ordering being implemented constitutes a very positive element for this sector, since the distortion caused by the dual exchange rate and currency limited broader development of self-employment, and insisted that there is no improvisation involved in these policy changes, given that the country has gained extensive experience in self-employment, which is recognized in our updated Economic Model, Policy Guidelines and Socio-Economic Strategy.

"This is not just a change in the list of (authorized) activities, the change is broader and more comprehensive, since it includes improvement of the tax system and mechanisms for the approval of licenses," the Deputy Prime Minister stated.

The fact that we are not talking about what is allowed at this point, but rather what is prohibited, does not imply a step backwards, he clarified. "If before some 120-plus activities were authorized, today we are talking about more than 2,000. A minimum number are prohibited for logical reasons, but new opportunities are being opened up," he stated.

The Deputy Prime Minister made a point of specifically addressing the issue of professional activities, in response to the concerns related to Decree-Law 20 of 2020, which prohibits the individual practice of veterinary medicine as self-employment: "In the new list of activities, this prohibition is maintained, but an exception is introduced referring to the care of affective animals."

Finally, he called to work within a framework of absolute legality and transparency, and recalled the need to think as a country. "There is no contradiction between individual self-interest and the interests of the country, we must free ourselves from self-centered attitudes and individualism, and there are many examples making evident the value of self-employed workers. This is Cuba, this is our people. We are going to work, we are going to build, we are going to impose our will, and we are going to triumph," he concluded.

Principles, possibilities and novelties of the new policy

The policy establishing the principles, possibilities, limitations and novelties of the self-employment improvement process was explained by Minister of Labor and Social Security Marta Elena Feitó Cabrera, who noted that the elaboration and revision process of specific legal regulations has yet to be fully completed.

"Each of the changes we are making is intended to consolidate this form of management, in which more than 600,000 persons are already employed across the country. Among them, 30% are young and 35% female," she said.

Feitó noted that current legislation only recognizes 127 activities in the non-state sector, but the country's economy is much broader. With the new policy, and taking as a reference the National Classification of Economic Activity, prepared by the National Statistics and Information Office, the number of increases to more than 2,100, of which only 124 are limited.

She clarified that none of the non-state activities currently authorized are eliminated and that limitations on computer programmers working in this modality are to be removed. "This had been a long-standing demand," she noted.

The Minister also pointed out that the new nomenclature has 21 categories, opening a wide range of options in several sections, and even though limitations are established for activities like teaching, which is constitutionally defined as a state responsibility, tutors, childcare providers and others, for example, are exempted and permissible.

Among the most innovative aspects of the policy, she mentioned the elimination of specific, limited scopes previously outlined for authorized activities. "An activity does not fit in a rule. Thus, from now on, the scope is determined by the interested party presenting the project, as long as what has been established is not violated," she said.

In order to make the self-employment application process more flexible, Feitó reported that a single “window” is to be established to complete all procedures and only two entities will review proposed projects: local bodies affiliated with the Ministry of Transportation and the Labor Department.

She likewise emphasized that the previously required step of registering with the National Tax Administration (ONAT) is to be eliminated. "The single window office makes direct contact with the ONAT to register the taxpayer and deliver the ID card accrediting him or her," Feitó explained.

Concluding her comments, the Minister clarified that those who are currently self-employed will be re-registered in a gradual, organized process, over a period of up to 12 months, which will include an updated definition of their work project.

Taxes and other fees

Minister of Finance and Prices Meisi Bolaños Weiss stated that adjustments to be made within the framework of perfecting self-employment do not entail an increase in the sector’s tax burden.

"We are maintaining the design of the tax burden," she said, and reported that fiscal measures associated with the country's economic strategy, and the Ordering Task, will actually favor its reduction.

The new measures include exemption of 100% of work-related expenses incurred by the self-employed, as well as an increased minimum tax exemption.

However, she added, the tax collection system is undergoing a re-organization, that will allow for maintenance of the level of revenue generated by the sector.

"We are moving toward an improvement in which these activities will become more dynamic and will generate higher levels of income, which will mean greater tax contributions," she explained.

Thus these workers, as well as the budgets of the municipalities where they live and work, will gain, since all tax contributions from the sector go to the municipality, she recalled.

Among the modifications introduced, she noted the required presentation of a sworn tax statement by all those conducting this type of non-state economic activity.

She described this change as positive, since it will allow all self-employed workers to document the source of income derived from their labor.

"If the income is legal, there is no reason not to declare it," she stated.

Another novelty is that investment expenses will be recognized as exemptions, a just demand that has been expressed for years, given the development that certain activities have undergone, the Minister noted.

Taking into account the changes introduced, and the fact that there will no longer be specific activities, but rather individual projects, the Minister of Finance and Prices insisted that the conditions exist to require all self-employed workers to conduct their operations through a bank account, something which to date was only obligatory for specific types of work.

Bolaños Weiss reiterated that the ONAT will be involved in the re-registration process over the coming months and that the taxpayer ID card will become the fundamental way self-employed workers identify themselves.

She insisted to currently self-employed workers that they need not worry about their security and requested their confidence, while noting that this updating process presents a challenge for the tax administration, local governments, financial directors and taxpayers, alike.