HAVANA, Cuba (Reuters) -- Cuba said on Friday it will cut phone ties with the
                  United States from next week in retaliation for the failure of American
                  companies to pay a new tax imposed by Havana in response to U.S. use of
                  frozen Cuban funds.

                  The measure -- the second cut-off by Cuba in the last two years -- would hit
                  communications between Cubans on the island and the large Cuban American
                  community in Florida and elsewhere in the United States during the approaching
                  holiday season.

                  A statement from the Council of State, the communist-run island's highest
                  governing body, said U.S. phone companies had informed Cuban state telecom
                  ETECSA they had not been authorized by the U.S. government to pay a new 10
                  percent tax.

                  Cuba slapped that charge on calls between the two nations in October in response
                  to a measure passed by the U.S. Congress allowing the use of frozen Cuban funds
                  to compensate the families of Cuban-American pilots killed when their planes were
                  shot down by a Cuban MiG fighter in 1996.

                  "For this motive, it was decided to totally suspend direct telephone
                  communications for the international service between Cuba and the United
                  States," Havana's statement said.

                  Back in October, Cuba warned phone links could be cut if Washington resisted
                  the tax, which would raise already high international phone costs in Cuba.

                  Under the October decree, Cuba's national phone company, Empresa de
                  Telecomunicaciones S.A. (ETECSA), a Cuban-Italian joint venture, was to retain
                  the additional funds generated by the 10 percent tax, levied on every minute of all
                  phone calls between the two countries.

                  Phone ties between the United States and Cuba are provided by ETECSA and
                  half a dozen U.S. firms that share the proceeds.

                  In an earlier dispute over frozen phone payments in early 1999, Havana -- which
                  has had no formal diplomatic ties with Washington for the last four decades --
                  cut five of seven phone circuits between the nations. They were restored in April
                  of this year.

                  The latest dispute dates from a bill passed by the U.S. Congress in October
                  allowing use of the frozen Cuban funds, a move Havana at the time condemned
                  as "robbery."

                  The U.S. legislation targeted frozen funds due to Cuba's phone company for
                  communications services between the two countries between 1966 and 1994.
                  These are estimated by Havana to total more than $120 million.

                  Cuba had said the 10 percent phone tax would remain in place "until the complete
                  return, with corresponding interest, of the Cuban funds illegally frozen in the
                  United States."

                  Cuba blames the U.S. government for the 1996 shoot-down of the two small
                  planes, whose four crew members were killed by missiles fired by a Cuban
                  fighter. The four dead men belonged to a Cuban exile group, Brothers to the
                  Rescue, which searched for Cuban rafters leaving the island.

                  Havana said the four had engaged in "provocative" flights close to the island that
                  U.S. authorities were tolerating.

                  The October decree said use of the frozen Cuban funds to compensate the dead
                  pilots' families would prompt similar violations and "acts of air and sea piracy by
                  terrorist groups which feel they have the backing to act with impunity."

                  A powerful anti-Castro group in Miami, the Cuban American National
                  Foundation, condemned the imminent phone cut-off as an illegal, cynical and
                  dictatorial tactic by Castro.

                  "As if we needed more evidence, again we see who the real Fidel Castro is," said
                  CANF executive vice president Dennis Hays in a statement faxed to foreign news
                  media in Havana.

                  "Just as we start the Christmas period, Castro is willing to summarily cut what
                  has become a vital link for Cuban families, purely to avoid the consequences of
                  his responsibility in the death of U.S. citizens."

                      Copyright 2000 Reuters.