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Cuba Rescinds Tax On Changing U.S. Dollars For CUCs

Jul 21, 2020 | By Gordon Mott
Cuba Rescinds Tax On Changing U.S. Dollars For CUCs
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The Cuban government announced that, starting July 20, it will no longer impose a 10 percent surcharge on U.S. dollars exchanged for CUCs, the Cuban Unified Currency tourists need to use for purchases in the country. The tax had effectively reduced the exchange rate to 87 cents, meaning those changing U.S. dollars into CUCs received only 87 CUCs for every $100 changed, because there was always a regular currency transaction fee of 3 percent added to the special tax levied on the U.S. currency. The transaction fee remains in place, producing a new real exchange rate of 97 cents for each CUC, giving American visitors more buying power when traveling to the island.

CUCs are also known as Cuban Convertible Pesos. They are only used in Cuba; they are not traded on world markets and their value stays set by the Cuban government, which prohibits their export from the country. Cuba also has another currency, the traditional peso known as a CUP, which is worth 1/25 the value of a CUC and used primarily by Cuban citizens.

The dual currency system has been in effect since 1994. In 2004, the Cuban government imposed a 10 percent tax on U.S. dollars that were exchanged for CUCs. At the time, the tax was seen as a way for the government to get more of every dollar that entered the country, both from tourists and from family members who were sending money to their relatives in Cuba. At various points in the last 16 years, the Cuban government has hinted at removing the surcharge, but it was always offered as a quid pro quo for concessions that would be made by the United States. This time, it appears to be a unilateral move.

The change comes at a low point for Cuban tourism. Since March, when the Covid-19 pandemic erupted worldwide, Cuba closed its doors to foreigners, effectively shutting down its tourist industry, one of the biggest sources of revenue for the country. The measure, plus internal requirements to wear masks and to social distance, seems to have limited the virus outbreak in Cuba. According to the Worldometer site, which tracks Coronavirus cases around the world, Cuba has had 2,446 cases with 87 deaths as of July 20. In the past week, the country has reported one new case a day or less.

According to local sources, the government is beginning to schedule limited tourist flights, but not to the mainland. While Cuba is often referred to as an island, the country also has several smaller islands, many with resorts and airports. The first flights will only go to such islands, and mainland excursions—including those into the capital of Havana—will remain off limits. There is still no word on when flights to Havana might be permitted to resume.

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