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
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.