Once seen as the cutting edge of Cuba's economic reforms and as a dash of color in an otherwise grim life, family-owned businesses are increasingly closing or going into hiding under pressure from government inspectors and taxes.

Just last month, police confiscated dozens of ice cream machines that had apparently been written off as broken by a government factory, but then were sold for up to $1,000 to people who fixed them and set up stores.

Ingenious Cubans are avoiding the crackdown with schemes such as converting home restaurants into secret bed-and-breakfasts for tourists, and turning licensed taxis into illegal cabs serving only trusted clients.

Cuba's family enterprises have blossomed since they were legalized in 1993, giving a society that once had virtually no commerce a splash of life by putting on sale everything from flowers to homemade ceramics and shoes. But government officials are now cracking down, saying they need to control the black marketeering and tax dodges that plague the sector, which encompasses 157 types of labor, from plumbers to pizza makers.

``With inspectors every day giving me fines or asking for bribes, and taxes leaving only $60 a month in profit, I had no choice,'' said Gil, a Havana engineer who last month closed the licensed restaurant he ran out of his living room and opened a clandestine TV repair shop.

The number of licensed self-employed plummeted from 208,000 to 171,861 in the year ending March 1, the National Tax Office reported. And it's still falling, Havana residents insist, despite government claims of a recent surge, because the crackdown has grown harsher the last two months.

``Every block around me used to have a little food place: drinks, sandwiches, ice cream. But now you can walk for blocks and not see anything,'' said Miriam, a Havana teacher who, like Gil, asked for anonymity.

Stiff fines

Most of the crackdown has come in the form of tightened enforcement of regulations that make it all but impossible for many enterprises to operate within the law.

Restaurants cannot have more than 12 chairs, hire nonfamily employees nor serve beef, fish or shellfish unless they are bought in special dollar-only shops, where prices are 20-40 times higher than in the black market.

Inspectors have been fining restaurants up to 1,000 pesos, or $45, for each chair over the limit, Havana residents said, and demanding to see dollar-store receipts even for items such as flour and vegetables, to make sure they have not been stolen from state warehouses.

Labor Ministry agents are checking papers to make sure all employees of a business are members of one family, and Health Ministry workers are getting tough with sanitation in kitchens and bathrooms, Cubans added.

Several shops have been forced to close and many more have been hit with fines of up to 5,000 pesos, or $227, a stiff punishment in an island where a physician officially earns only about $18 per month.

And some police and inspectors are demanding bribes, several Havana shopkeepers said, from $5 to overlook that 13th chair to $100 to release a government employee caught using his official car as an illegal taxi.

``This is the type of move we haven't seen since Batista'' in the 1950s, said one Havana dentist, ``where a police car pulls up, gets a meal and just drives off without paying.''

Income taxes

Topping off the pressures, self-employed Cubans are paying stiff income taxes and fees for the first time in 30 years. Restaurants that charge in dollars must pay between $300 and $600 per month for their licenses, and another 20 percent of the license fee for each relative employed.

Self-employed Cubans had until March 1 to file their tax returns but only 80 percent did so, the National Tax Office reported. It estimated total payments at 192 million pesos -- a mere $8.7 million.

Government officials insist they are not trying to choke off the self-employed sector, and Economy Minister Jose Luis Rodriguez even told a Spanish daily recently that he expected the sector would grow to 350,000 people ``in the next few years.''

But Rodriguez added that further economic reforms would come only if they are ``necessary to perfect our socialist system,'' and the government has refused requests to open stores where the self-employed can buy supplies.

Allowing self-employment in 1993 ``was a very dramatic change for Cuba, but . . . the government hasn't decided whether it wants this sector to stagnate or grow,'' said Philip Peters, who recently studied Cuba's small enterprise sector.

The income inequalities it created between the new rich and old poor no doubt concerned the government, added Peters, a senior fellow at the Alexis de Tocqueville Institution, a think-tank in Virginia.

Bus drivers cut deals

Yet Cubans have proven adept at bypassing all manner of government restrictions, however, and few doubt that most of the self-employed will be able to continue doing what islanders call ``beezness'' even from underground.

One prime example, they say, is the case of the ``private bus stops.''

Public bus drivers who earn the equivalent of $8 per month have cut discreet deals with regular passengers who want to avoid the perennially long lines waiting for the few buses not garaged for lack of spare parts.

For 10 pesos, instead of the usual half-a-peso fare, they will pick up passengers at prearranged spots where they don't have to stand in line.

Copyright © 1997 The Miami Herald