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Unlike most other licensed self-employment in Cuba, renting rooms in private homes only came under state regulation in the summer of 1997. Prior to that, those who engaged in this type of activity did so in a kind a "no man's land," as one respondent put it. Though the tax system for private homes is very similar to that applied to other areas of self-employment, it has a few unique features. First, the amount of one's monthly tax is based largely on one's location relative to Havana's primary tourist hotels.
 
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For example, a renter in La Rampa area of Vedado must pay a $250 monthly tax, while the monthly tax is just $100 for most residents of Centre Habana. In in all cases they must have this picture on the door of the house.

 

Second, self-employed renters must pay a year-end percentage of their earnings after deducting 10 percent for expenses and the total year's payments in the monthly CFM tax. Therefore, unlike many of the paladar proprietors in my sample who are able to avoid the year-end tax altogether based on their high monthly payments, private home-stays must pay an extra tax at the end of the year based on their after tax earnings. Third, private home renters seem to be the most vulnerable to fluctuations in the tourist economy since the vast majority of their customers are foreigners (not necessarily the case with paladar owners and taxi drivers). These special characteristics have the result of pushing many potentially legal renters underground and pressuring those with licenses to cheat in order to survive.

For example, Luis, a young college graduate who lives with his mother and sister on the outskirts of Havana, stressed the fact that the renting strategy (without a license) has only been a manner of supplementing the family's meager combined income of 400 Cuban pesos, not a scheme to get rich. He pointed out the fact that all CPs have been targeted criticized unjustly by the government as some kind of lumpen that live off of others. While he readily admitted that there were many who had gotten rich unjustly through the diversion of goods and stealing from state warehouses, he argued that CPs worked hard for their earnings, many times much harder than those with state Jobs (where "we pretend to work, you pretend to pay us" is sometimes the most accurate motto). "It hasn't been a marvel, it's only been a way to survive," is how he summed it up.

Magda, a licensed renter echoed Luis' comments, saying, "I'll always have enough if I save my money during the good months," she reasoned. "I make enough to live with honor and feed my family, but not enough to buy a car. After you deduct the $100 tax each month, there is enough left to live, but without luxury. We can sometimes go out to a restaurant paying in Cuban pesos. I can't imagine how other renters survive who have to pay taxes of $250 per month or higher." When asked if he could change one thing about the tax system, a third licensed renter named Oscar responded, "Taxes should be based on occupancy and income and not on a quota system. The Cuban economy is not one that gives incentive to capital as in the United States. It is designed to do just the opposite - discourage it."

Given these many restrictions, however, Oscar does admit that he still fares better than others and has a disposable income. As an example of the very slow growth of the sector and difficulty of saving or investing much money, he shared that he has been saving part of his earnings each month ($50) for the past five years in order to buy a car. He explained that he wants to buy a diesel powered American car that has a price tag of $6,000. The car would allow him to take his family on outings to the beach once in a while. He concluded by reiterating that no one is in the housing business to make it rich. According to him, most go into the CP sector to ensure their economic survival, and possibly to have a little bit of disposal income: "Thanks to this, I am alive," he explained. "Without this I'd be a dead man".

Licensed vs. Clandestine Renters: While one would like to use the licensed/unlicensed demarcation as the central distinguishing element in analyzing rental activity, it remains to be seen if there is any real sociological difference between the two. My impression is that the licensed renters charge more, rent more often and intensively, and dedicate more time and ef- fort to renting as their principal economic activity than do their unlicensed counterparts. This seems to be so because of the very high government fixed minimum monthly tax (CFM) that must be paid by those with licenses, regardless of occupancy. In other words, these licensed renters must pay between $100 and $250 (which changes depending upon location in the city/province) per month for the right to rent out one room of their homes, regardless of whether they have clients or not.

Of course, this tax grows substantially if one wants to declare more rooms for rent or serve food to the renters. Furthermore, clandestine workers seem to treat their rental activity as a secondary activity (even if it is primary in terms of the amount of income it generates), while few licensed renters can avoid to be casual or lax about it due to the quota tax system. Another tentative lesson from my interviews is, as one respondent put it: "We all cheat a little" (Todos hacen su trampita). In other words, while the legal distinction between licensed and unlicensed CPs is important, it is not absolute by any means. Actually, Miguel, a former renter who is interested in returning to the fold, said that he was unable to make enough to pay the tax the first time around due to his honesty and strictness in following the law. If he is able to get his license reissued (which seems doubtful given the government's refusal of issuing many CP licenses) , he was clear in stating that this time " I will do what it takes" to stay in business. Thus, while clandestine CPs operate totally outside the law, even licensed CPs make a large part of their earnings (the range was between 10% and 75% in my interviews) by practicing "creative bookkeeping" and bending the self-employment rules.

In this way, the CP license becomes more a protective facade, used to mask host of activities either not allowed or not specifically licensed. It is not merely a legalizing mechanism that separates the law-abiding citizens from supposed delinquents. Ironically, one renter had originally printed up business cards that read, "Room for Rent - Specialist in Food Service" (Rento Habitation - Especialista en Gastronomist). He explained to me that due to his special talents in the kitchen, he had originally in- tended to serve food to his guests. However, he found this to be both too costly for tax purposes and too time consuming. Thus, he only occasionally serves food to his guests, charging them a few dollars for each meal, yet still has no authorization to do so. While his cards were clear in stating that he only had one room for rent, another licensed renter gave me a handful of business cards openly declaring "Habitaciones Dona Amelia," the use of the plural indicating that she did rent more than one of her many rooms in an old, outwardly crumbling mansion in Vedado (even if she admitted to paying tax on just one of the rooms). The truly ironic aspect of her business cards, however, was the fact that they were double sided. While one side assured the holder of a comfortable and agreeable stay, the reverse side declared, "Dr. Amelia Betancur - Specialist in Traditional Medicine" (Dra. Amelia Betancur - Especialista en Medicina Tradicional.

The Purpose of Regulation: In explaining the intent behind the state's strict regulation of the private housing sector, Miguel, a university professor (once a licensed renter) who is currently looking to return to the self-employed fold shared these comments: The tax is designed to drown the client, not to make money for the government or share the wealth with the people. If profit were the government's intention, they would lower the tax and make a lot more money because everyone would have an incentive to sign up. The strict and ridiculous laws and taxes have the effect of pushing people underground and causing those with licenses to cheat. The law as it stands only benefits the larger entities (usually owned by ex-ministers, ex-military, or ex-members of the central committee). These people have large homes with many rooms and can earn enough to stay afloat by declaring one or two yet renting many more. The little guy is pushed out of the picture or must live in fear of not earning enough to pay the tax. Joaqufn, also a university professor, who has clandestinely rented a spare room in his home for years saw the state's approach to the self-employed sector in much the same way. He argued, "The tax is designed to push them all out of business, because the tax and inspections and police are so high and strict. Everyone who rents illegally would legalize themselves if the tax were based on how much they earned and not a monthly quota." When asked why the government did not just close down the CP sector if it really did not accept it ideologically, Joaquin argued, "The government is concerned about its image. It doesn't want to be seen as ruling it out, but would prefer to let it die on its own. It can do this through high taxes and restrictions, as well as catching CPs in illegality." He added the caveat, "Of course, it's not a matter of them being delinquents, but based on the fact that there is not another way for them to make money. They don't choose to be illegal."

A recent article from Cuba's fledgling independent press estimated that as many as 35% of Cuba's tourists stay in private homes and that an estimated 200,000 tourists had lodged in such homes in the first six months of 1999. The article indicated that Cuban authorities are becoming concerned about the loss of tourism revenue to the second economy and reason that they cannot adequately "protect" tourists who stay in private homes. It is worth asking whether the government also wants to "protect" Cubans from the "corrupting" influences increased exposure to foreigners may bring. The article also quoted a government official who indicated that rising levels of bribery and corruption are also worrying regulators of self-employment activities, "There is a limited confidence in the capacity of government inspectors to resist the bribes of the proprietors" (Zuniga 1999a).

In my own research into the private housing market, only two respondents admitted to giving bribes to government inspectors. However, most of the others admitted that it was a fairly widespread practice. One respondent mentioned that of the three different types of inspectors (housing, immigration, and tax) the immigration inspectors were the "least bribable" being members of the military. A number of respondents agreed that inspections were most common toward the end of the year, hinting that they came in search of extra cash for the holidays. Sandra, a former licensed renter now living in Miami, openly admitted to paying bribes on a regular basis. She even stated that some housing inspectors played the secondary role of middleman, occasionally showing up at her home with foreign tourists in tow, searching for their own commissions.